Correlation Between United Parcel and Norfolk Southern
Can any of the company-specific risk be diversified away by investing in both United Parcel 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 United Parcel and Norfolk Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Parcel Service and Norfolk Southern, you can compare the effects of market volatilities on United Parcel 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 United Parcel with a short position of Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and Norfolk Southern.
Diversification Opportunities for United Parcel and Norfolk Southern
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between United and Norfolk is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and Norfolk Southern go up and down completely randomly.
Pair Corralation between United Parcel and Norfolk Southern
Considering the 90-day investment horizon United Parcel Service is expected to under-perform the Norfolk Southern. But the stock apears to be less risky and, when comparing its historical volatility, United Parcel Service is 1.0 times less risky than Norfolk Southern. The stock trades about -0.02 of its potential returns per unit of risk. The Norfolk Southern is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 23,580 in Norfolk Southern on August 24, 2024 and sell it today you would earn a total of 2,846 from holding Norfolk Southern or generate 12.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Parcel Service vs. Norfolk Southern
Performance |
| Timeline |
| United Parcel Service |
| Norfolk Southern |
United Parcel and Norfolk Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Parcel and Norfolk Southern
The main advantage of trading using opposite United Parcel and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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.| United Parcel vs. GXO Logistics | United Parcel vs. JB Hunt Transport | United Parcel vs. Expeditors International of | United Parcel vs. CH Robinson Worldwide |
| Norfolk Southern vs. Union Pacific | Norfolk Southern vs. Canadian Pacific Railway | Norfolk Southern vs. Canadian National Railway | Norfolk Southern vs. Westinghouse Air Brake |
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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