Correlation Between NORFOLK and Celestica

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

Diversification Opportunities for NORFOLK and Celestica

-0.66

Correlation Coefficient

NORFOLK  Celestica

Excellent diversification

The 3 months correlation between NORFOLK and Celestica is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P and Celestica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celestica 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 Celestica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celestica has no effect on the direction of NORFOLK i.e., NORFOLK and Celestica go up and down completely randomly.

Pair Corralation between NORFOLK and Celestica

Assuming the 90 days trading horizon NORFOLK SOUTHN P is expected to under-perform the Celestica. But the bond apears to be less risky and, when comparing its historical volatility, NORFOLK SOUTHN P is 1.12 times less risky than Celestica. The bond trades about -0.07 of its potential returns per unit of risk. The Celestica is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  8,560  in Celestica on September 24, 2024 and sell it today you would earn a total of  985.00  from holding Celestica or generate 11.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	75.0%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  Celestica

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 unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for NORFOLK SOUTHN P investors.

Celestica

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Celestica are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Celestica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NORFOLK and Celestica

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

The idea behind NORFOLK SOUTHN P and Celestica 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.