Correlation Between NORFOLK and Viemed Healthcare

Can any of the company-specific risk be diversified away by investing in both NORFOLK and Viemed Healthcare at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NORFOLK and Viemed Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NORFOLK SOUTHN P and Viemed Healthcare, you can compare the effects of market volatilities on NORFOLK and Viemed Healthcare and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NORFOLK with a short position of Viemed Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORFOLK and Viemed Healthcare.

Diversification Opportunities for NORFOLK and Viemed Healthcare

0.75

Correlation Coefficient

NORFOLK  Viemed Healthcare

Poor diversification

The 3 months correlation between NORFOLK and Viemed is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P and Viemed Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viemed Healthcare and NORFOLK is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NORFOLK SOUTHN P are associated (or correlated) with Viemed Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viemed Healthcare has no effect on the direction of NORFOLK i.e., NORFOLK and Viemed Healthcare go up and down completely randomly.

Pair Corralation between NORFOLK and Viemed Healthcare

Assuming the 90 days trading horizon NORFOLK SOUTHN P is expected to generate 0.5 times more return on investment than Viemed Healthcare. However, NORFOLK SOUTHN P is 1.98 times less risky than Viemed Healthcare. It trades about -0.05 of its potential returns per unit of risk. Viemed Healthcare is currently generating about -0.05 per unit of risk. If you would invest  9,371  in NORFOLK SOUTHN P on October 26, 2024 and sell it today you would lose (211.00) from holding NORFOLK SOUTHN P or give up 2.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	71.67%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  Viemed Healthcare

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORFOLK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Viemed Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viemed Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Viemed Healthcare is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NORFOLK and Viemed Healthcare

The main advantage of trading using opposite NORFOLK and Viemed Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORFOLK position performs unexpectedly, Viemed Healthcare can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Viemed Healthcare will offset losses from the drop in Viemed Healthcare's long position.

The idea behind NORFOLK SOUTHN P and Viemed Healthcare pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.