Correlation Between NORFOLK and American Environmental

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

Diversification Opportunities for NORFOLK and American Environmental

0.0

Correlation Coefficient

NORFOLK  American Environmental

Pay attention - limited upside

The 3 months correlation between NORFOLK and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P and American Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Environmental 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 American Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Environmental has no effect on the direction of NORFOLK i.e., NORFOLK and American Environmental go up and down completely randomly.

Pair Corralation between NORFOLK and American Environmental

If you would invest  0.01  in American Environmental on December 24, 2024 and sell it today you would earn a total of  0.00  from holding American Environmental or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  American Environmental

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

American Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, American Environmental is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NORFOLK and American Environmental

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

The idea behind NORFOLK SOUTHN P and American Environmental 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.