Correlation Between NORFOLK and NetEase

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

Diversification Opportunities for NORFOLK and NetEase

0.09

Correlation Coefficient

NORFOLK  NetEase

Significant diversification

The 3 months correlation between NORFOLK and NetEase is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of NORFOLK i.e., NORFOLK and NetEase go up and down completely randomly.

Pair Corralation between NORFOLK and NetEase

Assuming the 90 days trading horizon NORFOLK SOUTHN P is expected to under-perform the NetEase. But the bond apears to be less risky and, when comparing its historical volatility, NORFOLK SOUTHN P is 1.27 times less risky than NetEase. The bond trades about -0.04 of its potential returns per unit of risk. The NetEase is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,849  in NetEase on September 24, 2024 and sell it today you would earn a total of  1,360  from holding NetEase or generate 17.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	71.43%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  NetEase

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 latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NORFOLK SOUTHN P investors.

NetEase

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, NetEase may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NORFOLK and NetEase

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

The idea behind NORFOLK SOUTHN P and NetEase 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.