Correlation Between MGIC INVESTMENT and Norfolk Southern
Can any of the company-specific risk be diversified away by investing in both MGIC INVESTMENT and Norfolk Southern 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 MGIC INVESTMENT and Norfolk Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGIC INVESTMENT and Norfolk Southern, you can compare the effects of market volatilities on MGIC INVESTMENT and Norfolk Southern 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 MGIC INVESTMENT with a short position of Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC INVESTMENT and Norfolk Southern.
Diversification Opportunities for MGIC INVESTMENT and Norfolk Southern
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MGIC and Norfolk is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding MGIC INVESTMENT and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern and MGIC INVESTMENT 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 MGIC INVESTMENT are associated (or correlated) with Norfolk Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of MGIC INVESTMENT i.e., MGIC INVESTMENT and Norfolk Southern go up and down completely randomly.
Pair Corralation between MGIC INVESTMENT and Norfolk Southern
Assuming the 90 days trading horizon MGIC INVESTMENT is expected to generate 1.03 times less return on investment than Norfolk Southern. But when comparing it to its historical volatility, MGIC INVESTMENT is 2.52 times less risky than Norfolk Southern. It trades about 0.53 of its potential returns per unit of risk. Norfolk Southern is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 22,800 in Norfolk Southern on September 5, 2024 and sell it today you would earn a total of 3,200 from holding Norfolk Southern or generate 14.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGIC INVESTMENT vs. Norfolk Southern
Performance |
| Timeline |
| MGIC INVESTMENT |
| Norfolk Southern |
MGIC INVESTMENT and Norfolk Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGIC INVESTMENT and Norfolk Southern
The main advantage of trading using opposite MGIC INVESTMENT and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGIC INVESTMENT position performs unexpectedly, Norfolk Southern 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 Southern will offset losses from the drop in Norfolk Southern's long position.| MGIC INVESTMENT vs. Townsquare Media | MGIC INVESTMENT vs. HANOVER INSURANCE | MGIC INVESTMENT vs. Seven West Media | MGIC INVESTMENT vs. Selective Insurance Group |
| Norfolk Southern vs. MIRAMAR HOTEL INV | Norfolk Southern vs. Bumrungrad Hospital Public | Norfolk Southern vs. Natural Health Trends | Norfolk Southern vs. HYATT HOTELS A |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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