Correlation Between NORFOLK and Mativ Holdings

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

Diversification Opportunities for NORFOLK and Mativ Holdings

0.28

Correlation Coefficient

NORFOLK  Mativ Holdings

Modest diversification

The 3 months correlation between NORFOLK and Mativ is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P and Mativ Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mativ 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 Mativ Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mativ Holdings has no effect on the direction of NORFOLK i.e., NORFOLK and Mativ Holdings go up and down completely randomly.

Pair Corralation between NORFOLK and Mativ Holdings

Assuming the 90 days trading horizon NORFOLK SOUTHN P is expected to generate 0.19 times more return on investment than Mativ Holdings. However, NORFOLK SOUTHN P is 5.27 times less risky than Mativ Holdings. It trades about -0.18 of its potential returns per unit of risk. Mativ Holdings is currently generating about -0.47 per unit of risk. If you would invest  9,907  in NORFOLK SOUTHN P on September 25, 2024 and sell it today you would lose (148.00) from holding NORFOLK SOUTHN P or give up 1.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  Mativ 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.

Mativ Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mativ Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with NORFOLK and Mativ Holdings

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

The idea behind NORFOLK SOUTHN P and Mativ 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.