Correlation Between Norfolk Southern and ROK Resources
Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and ROK Resources 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 ROK Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norfolk Southern and ROK Resources, you can compare the effects of market volatilities on Norfolk Southern and ROK Resources 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 ROK Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and ROK Resources.
Diversification Opportunities for Norfolk Southern and ROK Resources
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Norfolk and ROK is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and ROK Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROK Resources 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 ROK Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROK Resources has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and ROK Resources go up and down completely randomly.
Pair Corralation between Norfolk Southern and ROK Resources
Considering the 90-day investment horizon Norfolk Southern is expected to generate 0.38 times more return on investment than ROK Resources. However, Norfolk Southern is 2.63 times less risky than ROK Resources. It trades about -0.01 of its potential returns per unit of risk. ROK Resources is currently generating about 0.0 per unit of risk. If you would invest 25,341 in Norfolk Southern on November 28, 2024 and sell it today you would lose (931.00) from holding Norfolk Southern or give up 3.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norfolk Southern vs. ROK Resources
Performance |
| Timeline |
| Norfolk Southern |
| ROK Resources |
Norfolk Southern and ROK Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norfolk Southern and ROK Resources
The main advantage of trading using opposite Norfolk Southern and ROK Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, ROK Resources 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 ROK Resources will offset losses from the drop in ROK Resources' long position.| Norfolk Southern vs. Union Pacific | Norfolk Southern vs. Canadian Pacific Railway | Norfolk Southern vs. Canadian National Railway | Norfolk Southern vs. Westinghouse Air Brake |
| ROK Resources vs. Alto Neuroscience, | ROK Resources vs. Kingdee International Software | ROK Resources vs. Western Digital | ROK Resources vs. Where Food Comes |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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