Correlation Between Norwegian Air and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Cairn Homes 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 Cairn Homes 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 Cairn Homes PLC, you can compare the effects of market volatilities on Norwegian Air and Cairn Homes 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 Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Cairn Homes.
Diversification Opportunities for Norwegian Air and Cairn Homes
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Norwegian and Cairn is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC 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 Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of Norwegian Air i.e., Norwegian Air and Cairn Homes go up and down completely randomly.
Pair Corralation between Norwegian Air and Cairn Homes
Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to generate 1.32 times more return on investment than Cairn Homes. However, Norwegian Air is 1.32 times more volatile than Cairn Homes PLC. It trades about -0.14 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about -0.24 per unit of risk. If you would invest 1,106 in Norwegian Air Shuttle on October 20, 2024 and sell it today you would lose (72.00) from holding Norwegian Air Shuttle or give up 6.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. Cairn Homes PLC
Performance |
| Timeline |
| Norwegian Air Shuttle |
| Cairn Homes PLC |
Norwegian Air and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and Cairn Homes
The main advantage of trading using opposite Norwegian Air and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Cairn Homes 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 Cairn Homes will offset losses from the drop in Cairn Homes' long position.| Norwegian Air vs. Lindsell Train Investment | Norwegian Air vs. Bankers Investment Trust | Norwegian Air vs. Evolution Gaming Group | Norwegian Air vs. MediaZest plc |
| Cairn Homes vs. Ecofin Global Utilities | Cairn Homes vs. BE Semiconductor Industries | Cairn Homes vs. Leroy Seafood Group | Cairn Homes vs. Aeorema Communications Plc |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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