Correlation Between Norfolk and Valens

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

By analyzing existing cross correlation between Norfolk Southern Corp and Valens, you can compare the effects of market volatilities on Norfolk and Valens 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 Valens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk and Valens.

Diversification Opportunities for Norfolk and Valens

0.39

Correlation Coefficient

Norfolk  Valens

Weak diversification

The 3 months correlation between Norfolk and Valens is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern Corp and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Southern Corp are associated (or correlated) with Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of Norfolk i.e., Norfolk and Valens go up and down completely randomly.

Pair Corralation between Norfolk and Valens

Assuming the 90 days trading horizon Norfolk Southern Corp is expected to under-perform the Valens. But the bond apears to be less risky and, when comparing its historical volatility, Norfolk Southern Corp is 3.09 times less risky than Valens. The bond trades about -0.11 of its potential returns per unit of risk. The Valens is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  218.00  in Valens on September 23, 2024 and sell it today you would lose (34.00) from holding Valens or give up 15.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.38%
Values	Daily Returns

Norfolk Southern Corp  vs.  Valens

Norfolk Southern Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norfolk Southern Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating 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 Southern Corp investors.

Valens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Norfolk and Valens

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

The idea behind Norfolk Southern Corp and Valens 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.

Check out your portfolio center.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.