Correlation Between NORFOLK and Palomar Holdings

Can any of the company-specific risk be diversified away by investing in both NORFOLK and Palomar Holdings 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 Palomar Holdings 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 Palomar Holdings, you can compare the effects of market volatilities on NORFOLK and Palomar Holdings 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 Palomar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORFOLK and Palomar Holdings.

Diversification Opportunities for NORFOLK and Palomar Holdings

-0.19

Correlation Coefficient

NORFOLK  Palomar Holdings

Good diversification

The 3 months correlation between NORFOLK and Palomar is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings 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 Palomar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palomar Holdings has no effect on the direction of NORFOLK i.e., NORFOLK and Palomar Holdings go up and down completely randomly.

Pair Corralation between NORFOLK and Palomar Holdings

Assuming the 90 days trading horizon NORFOLK SOUTHN P is expected to under-perform the Palomar Holdings. But the bond apears to be less risky and, when comparing its historical volatility, NORFOLK SOUTHN P is 14.0 times less risky than Palomar Holdings. The bond trades about -0.15 of its potential returns per unit of risk. The Palomar Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9,467  in Palomar Holdings on September 28, 2024 and sell it today you would earn a total of  1,051  from holding Palomar Holdings or generate 11.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  Palomar Holdings

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.

Palomar Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Palomar Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NORFOLK and Palomar Holdings

The main advantage of trading using opposite NORFOLK and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORFOLK position performs unexpectedly, Palomar Holdings 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 Palomar Holdings will offset losses from the drop in Palomar Holdings' long position.

The idea behind NORFOLK SOUTHN P and Palomar Holdings 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..