Correlation Between NORFOLK and Stagwell

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

Diversification Opportunities for NORFOLK and Stagwell

0.29

Correlation Coefficient

NORFOLK  Stagwell

Modest diversification

The 3 months correlation between NORFOLK and Stagwell is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell 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 Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of NORFOLK i.e., NORFOLK and Stagwell go up and down completely randomly.

Pair Corralation between NORFOLK and Stagwell

Assuming the 90 days trading horizon NORFOLK SOUTHN P is expected to generate 0.44 times more return on investment than Stagwell. However, NORFOLK SOUTHN P is 2.26 times less risky than Stagwell. It trades about -0.18 of its potential returns per unit of risk. Stagwell is currently generating about -0.69 per unit of risk. If you would invest  9,732  in NORFOLK SOUTHN P on October 15, 2024 and sell it today you would lose (211.00) from holding NORFOLK SOUTHN P or give up 2.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  Stagwell

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.

Stagwell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with NORFOLK and Stagwell

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

The idea behind NORFOLK SOUTHN P and Stagwell 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.