Correlation Between Norwegian Air and London Security
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and London Security 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 London Security 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 London Security Plc, you can compare the effects of market volatilities on Norwegian Air and London Security 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 London Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and London Security.
Diversification Opportunities for Norwegian Air and London Security
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Norwegian and London is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security 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 London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of Norwegian Air i.e., Norwegian Air and London Security go up and down completely randomly.
Pair Corralation between Norwegian Air and London Security
Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to generate 1.82 times more return on investment than London Security. However, Norwegian Air is 1.82 times more volatile than London Security Plc. It trades about 0.03 of its potential returns per unit of risk. London Security Plc is currently generating about 0.04 per unit of risk. If you would invest 870.00 in Norwegian Air Shuttle on August 30, 2024 and sell it today you would earn a total of 233.00 from holding Norwegian Air Shuttle or generate 26.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. London Security Plc
Performance |
| Timeline |
| Norwegian Air Shuttle |
| London Security Plc |
Norwegian Air and London Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and London Security
The main advantage of trading using opposite Norwegian Air and London Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, London Security 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 London Security will offset losses from the drop in London Security's long position.| Norwegian Air vs. Lendinvest PLC | Norwegian Air vs. Neometals | Norwegian Air vs. Albion Technology General | Norwegian Air vs. Jupiter Fund Management |
| London Security vs. Aberdeen Diversified Income | London Security vs. Molson Coors Beverage | London Security vs. Fevertree Drinks Plc | London Security vs. Gamma 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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