Correlation Between NORFOLK and Futuretech

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

Diversification Opportunities for NORFOLK and Futuretech

0.04

Correlation Coefficient

NORFOLK  Futuretech

Significant diversification

The 3 months correlation between NORFOLK and Futuretech is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P and Futuretech II Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Futuretech II Acquisition 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 Futuretech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Futuretech II Acquisition has no effect on the direction of NORFOLK i.e., NORFOLK and Futuretech go up and down completely randomly.

Pair Corralation between NORFOLK and Futuretech

Assuming the 90 days trading horizon NORFOLK SOUTHN P is expected to under-perform the Futuretech. But the bond apears to be less risky and, when comparing its historical volatility, NORFOLK SOUTHN P is 3.59 times less risky than Futuretech. The bond trades about -0.08 of its potential returns per unit of risk. The Futuretech II Acquisition is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,129  in Futuretech II Acquisition on December 25, 2024 and sell it today you would earn a total of  49.00  from holding Futuretech II Acquisition or generate 4.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.09%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  Futuretech II Acquisition

NORFOLK SOUTHN P

Risk-Adjusted Performance

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Futuretech II Acquisition

Risk-Adjusted Performance

Insignificant

Over the last 90 days Futuretech II Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady forward indicators, Futuretech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NORFOLK and Futuretech

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

The idea behind NORFOLK SOUTHN P and Futuretech II Acquisition 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.