Correlation Between Norfolk Southern and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and NMI Holdings 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 Southern and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norfolk Southern and NMI Holdings, you can compare the effects of market volatilities on Norfolk Southern and NMI Holdings 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 Southern with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and NMI Holdings.
Diversification Opportunities for Norfolk Southern and NMI Holdings
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Norfolk and NMI is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Norfolk Southern 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 are associated (or correlated) with NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and NMI Holdings go up and down completely randomly.
Pair Corralation between Norfolk Southern and NMI Holdings
Assuming the 90 days horizon Norfolk Southern is expected to generate 1.26 times more return on investment than NMI Holdings. However, Norfolk Southern is 1.26 times more volatile than NMI Holdings. It trades about 0.11 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.03 per unit of risk. If you would invest 22,667 in Norfolk Southern on September 4, 2024 and sell it today you would earn a total of 3,333 from holding Norfolk Southern or generate 14.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norfolk Southern vs. NMI Holdings
Performance |
| Timeline |
| Norfolk Southern |
| NMI Holdings |
Norfolk Southern and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norfolk Southern and NMI Holdings
The main advantage of trading using opposite Norfolk Southern and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, NMI Holdings 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 NMI Holdings will offset losses from the drop in NMI Holdings' long position.| Norfolk Southern vs. PennyMac Mortgage Investment | Norfolk Southern vs. Kaufman Broad SA | Norfolk Southern vs. MGIC INVESTMENT | Norfolk Southern vs. Transport International Holdings |
| NMI Holdings vs. HYDROFARM HLD GRP | NMI Holdings vs. VIAPLAY GROUP AB | NMI Holdings vs. Titan Machinery | NMI Holdings vs. SCANSOURCE |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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