Correlation Between Norwegian Air and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Freeport McMoRan 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 Freeport McMoRan 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 Freeport McMoRan, you can compare the effects of market volatilities on Norwegian Air and Freeport McMoRan 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 Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Freeport McMoRan.
Diversification Opportunities for Norwegian Air and Freeport McMoRan
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Norwegian and Freeport is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 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 Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of Norwegian Air i.e., Norwegian Air and Freeport McMoRan go up and down completely randomly.
Pair Corralation between Norwegian Air and Freeport McMoRan
Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to generate 0.87 times more return on investment than Freeport McMoRan. However, Norwegian Air Shuttle is 1.15 times less risky than Freeport McMoRan. It trades about -0.12 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.19 per unit of risk. If you would invest 1,132 in Norwegian Air Shuttle on October 12, 2024 and sell it today you would lose (44.00) from holding Norwegian Air Shuttle or give up 3.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. Freeport McMoRan
Performance |
| Timeline |
| Norwegian Air Shuttle |
| Freeport McMoRan |
Norwegian Air and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and Freeport McMoRan
The main advantage of trading using opposite Norwegian Air and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Freeport McMoRan 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 Freeport McMoRan will offset losses from the drop in Freeport McMoRan's long position.| Norwegian Air vs. Monster Beverage Corp | Norwegian Air vs. Premier Foods PLC | Norwegian Air vs. Ebro Foods | Norwegian Air vs. National Beverage Corp |
| Freeport McMoRan vs. Norwegian Air Shuttle | Freeport McMoRan vs. Ryanair Holdings plc | Freeport McMoRan vs. Lindsell Train Investment | Freeport McMoRan vs. Wizz Air Holdings |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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