Correlation Between Pan American and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Pan American 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 Pan American and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan American Silver and Norwegian Air Shuttle, you can compare the effects of market volatilities on Pan American 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 Pan American with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and Norwegian Air.
Diversification Opportunities for Pan American and Norwegian Air
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pan and Norwegian is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver 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 Pan American 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 Pan American Silver 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 Pan American i.e., Pan American and Norwegian Air go up and down completely randomly.
Pair Corralation between Pan American and Norwegian Air
Assuming the 90 days trading horizon Pan American Silver is expected to generate 1.16 times more return on investment than Norwegian Air. However, Pan American is 1.16 times more volatile than Norwegian Air Shuttle. It trades about 0.08 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.06 per unit of risk. If you would invest 3,027 in Pan American Silver on October 30, 2024 and sell it today you would earn a total of 201.00 from holding Pan American Silver or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pan American Silver vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Pan American Silver |
| Norwegian Air Shuttle |
Pan American and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan American and Norwegian Air
The main advantage of trading using opposite Pan American and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan American 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.| Pan American vs. Berkshire Hathaway | Pan American vs. Samsung Electronics Co | Pan American vs. Samsung Electronics Co | Pan American vs. Chocoladefabriken Lindt Spruengli |
| Norwegian Air vs. Foresight Environmental Infrastructure | Norwegian Air vs. Southwest Airlines Co | Norwegian Air vs. Cairn Homes PLC | Norwegian Air vs. American Homes 4 |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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