Correlation Between Norwegian Air and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Eastman Chemical 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 Norwegian Air and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norwegian Air Shuttle and Eastman Chemical Co, you can compare the effects of market volatilities on Norwegian Air and Eastman Chemical 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 Norwegian Air with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Eastman Chemical.
Diversification Opportunities for Norwegian Air and Eastman Chemical
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norwegian and Eastman is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Eastman Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Norwegian Air 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 Norwegian Air Shuttle are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Norwegian Air i.e., Norwegian Air and Eastman Chemical go up and down completely randomly.
Pair Corralation between Norwegian Air and Eastman Chemical
Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to generate 1.31 times more return on investment than Eastman Chemical. However, Norwegian Air is 1.31 times more volatile than Eastman Chemical Co. It trades about 0.32 of its potential returns per unit of risk. Eastman Chemical Co is currently generating about -0.04 per unit of risk. If you would invest 987.00 in Norwegian Air Shuttle on August 28, 2024 and sell it today you would earn a total of 152.00 from holding Norwegian Air Shuttle or generate 15.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. Eastman Chemical Co
Performance |
| Timeline |
| Norwegian Air Shuttle |
| Eastman Chemical |
Norwegian Air and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and Eastman Chemical
The main advantage of trading using opposite Norwegian Air and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.| Norwegian Air vs. Samsung Electronics Co | Norwegian Air vs. Samsung Electronics Co | Norwegian Air vs. Hyundai Motor | Norwegian Air vs. Toyota Motor Corp |
| Eastman Chemical vs. Samsung Electronics Co | Eastman Chemical vs. Samsung Electronics Co | Eastman Chemical vs. Hyundai Motor | Eastman Chemical vs. Toyota Motor Corp |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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