Correlation Between Public Service and Norfolk Southern

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

Diversification Opportunities for Public Service and Norfolk Southern

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Public and Norfolk is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern and Public Service 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 Public Service Enterprise 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 Public Service i.e., Public Service and Norfolk Southern go up and down completely randomly.

Pair Corralation between Public Service and Norfolk Southern

Considering the 90-day investment horizon Public Service Enterprise is expected to generate 0.84 times more return on investment than Norfolk Southern. However, Public Service Enterprise is 1.19 times less risky than Norfolk Southern. It trades about 0.02 of its potential returns per unit of risk. Norfolk Southern is currently generating about 0.02 per unit of risk. If you would invest  5,364  in Public Service Enterprise on September 9, 2022 and sell it today you would earn a total of  631.00  from holding Public Service Enterprise or generate 11.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Public Service Enterprise  vs.  Norfolk Southern

 Performance (%) 
       Timeline  
Public Service Enterprise 
Public Performance
0 of 100
Over the last 90 days Public Service Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Public Price Channel

Norfolk Southern 
Norfolk Performance
0 of 100
Over the last 90 days Norfolk Southern has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Norfolk Southern is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Norfolk Price Channel

Public Service and Norfolk Southern Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Public Service and Norfolk Southern

The main advantage of trading using opposite Public Service and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service 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.
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The idea behind Public Service Enterprise and Norfolk Southern 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.
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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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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