Correlation Between Host Hotels and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Host Hotels and Norwegian Air 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 Host Hotels and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Host Hotels Resorts and Norwegian Air Shuttle, you can compare the effects of market volatilities on Host Hotels and Norwegian Air 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 Host Hotels with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and Norwegian Air.
Diversification Opportunities for Host Hotels and Norwegian Air
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Host and Norwegian is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle and Host Hotels 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 Host Hotels Resorts are associated (or correlated) with Norwegian Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Air Shuttle has no effect on the direction of Host Hotels i.e., Host Hotels and Norwegian Air go up and down completely randomly.
Pair Corralation between Host Hotels and Norwegian Air
Assuming the 90 days trading horizon Host Hotels Resorts is expected to under-perform the Norwegian Air. But the stock apears to be less risky and, when comparing its historical volatility, Host Hotels Resorts is 1.53 times less risky than Norwegian Air. The stock trades about -0.13 of its potential returns per unit of risk. The Norwegian Air Shuttle is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 1,123 in Norwegian Air Shuttle on September 24, 2024 and sell it today you would lose (36.00) from holding Norwegian Air Shuttle or give up 3.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Host Hotels Resorts vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Host Hotels Resorts |
| Norwegian Air Shuttle |
Host Hotels and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Host Hotels and Norwegian Air
The main advantage of trading using opposite Host Hotels and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels position performs unexpectedly, Norwegian Air 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 Norwegian Air will offset losses from the drop in Norwegian Air's long position.| Host Hotels vs. Uniper SE | Host Hotels vs. Mulberry Group PLC | Host Hotels vs. London Security Plc | Host Hotels vs. Triad Group PLC |
| Norwegian Air vs. Uniper SE | Norwegian Air vs. Mulberry Group PLC | Norwegian Air vs. London Security Plc | Norwegian Air vs. Triad Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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