Correlation Between Norfolk Southern and ConAgra Foods

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Can any of the company-specific risk be diversified away by investing in both Norfolk Southern and ConAgra Foods 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 ConAgra Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norfolk Southern and ConAgra Foods, you can compare the effects of market volatilities on Norfolk Southern and ConAgra Foods 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 ConAgra Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norfolk Southern and ConAgra Foods.

Diversification Opportunities for Norfolk Southern and ConAgra Foods

-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between Norfolk and ConAgra is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Norfolk Southern and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods 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 ConAgra Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConAgra Foods has no effect on the direction of Norfolk Southern i.e., Norfolk Southern and ConAgra Foods go up and down completely randomly.

Pair Corralation between Norfolk Southern and ConAgra Foods

Considering the 90-day investment horizon Norfolk Southern is expected to generate 1.23 times more return on investment than ConAgra Foods. However, Norfolk Southern is 1.23 times more volatile than ConAgra Foods. It trades about 0.17 of its potential returns per unit of risk. ConAgra Foods is currently generating about -0.05 per unit of risk. If you would invest  24,017  in Norfolk Southern on November 24, 2023 and sell it today you would earn a total of  1,745  from holding Norfolk Southern or generate 7.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Norfolk Southern  vs.  ConAgra Foods

 Performance 
       Timeline  
Norfolk Southern 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Norfolk Southern are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Norfolk Southern exhibited solid returns over the last few months and may actually be approaching a breakup point.
ConAgra Foods 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days ConAgra Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ConAgra Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Norfolk Southern and ConAgra Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Norfolk Southern and ConAgra Foods

The main advantage of trading using opposite Norfolk Southern and ConAgra Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norfolk Southern position performs unexpectedly, ConAgra Foods 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 ConAgra Foods will offset losses from the drop in ConAgra Foods' long position.
The idea behind Norfolk Southern and ConAgra Foods 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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