Correlation Between Vulcan Materials and NORFOLK

Can any of the company-specific risk be diversified away by investing in both Vulcan Materials and NORFOLK 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 Vulcan Materials and NORFOLK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vulcan Materials and NORFOLK SOUTHN P, you can compare the effects of market volatilities on Vulcan Materials and NORFOLK 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 Vulcan Materials with a short position of NORFOLK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Materials and NORFOLK.

Diversification Opportunities for Vulcan Materials and NORFOLK

-0.15

Correlation Coefficient

Vulcan Materials  NORFOLK

Good diversification

The 3 months correlation between Vulcan and NORFOLK is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and NORFOLK SOUTHN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHN P and Vulcan Materials 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 Vulcan Materials are associated (or correlated) with NORFOLK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORFOLK SOUTHN P has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and NORFOLK go up and down completely randomly.

Pair Corralation between Vulcan Materials and NORFOLK

Considering the 90-day investment horizon Vulcan Materials is expected to under-perform the NORFOLK. But the stock apears to be less risky and, when comparing its historical volatility, Vulcan Materials is 4.6 times less risky than NORFOLK. The stock trades about -0.42 of its potential returns per unit of risk. The NORFOLK SOUTHN P is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,360  in NORFOLK SOUTHN P on October 12, 2024 and sell it today you would earn a total of  285.00  from holding NORFOLK SOUTHN P or generate 3.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

Vulcan Materials  vs.  NORFOLK SOUTHN P

Vulcan Materials

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Vulcan Materials is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

NORFOLK SOUTHN P

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NORFOLK SOUTHN P are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Vulcan Materials and NORFOLK

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

The idea behind Vulcan Materials and NORFOLK SOUTHN P 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.