Correlation Between Air France-KLM and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Air France-KLM 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 Air France-KLM and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air France KLM SA and Norwegian Air Shuttle, you can compare the effects of market volatilities on Air France-KLM 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 Air France-KLM with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France-KLM and Norwegian Air.
Diversification Opportunities for Air France-KLM and Norwegian Air
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Air and Norwegian is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA 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 Air France-KLM 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 Air France KLM SA 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 Air France-KLM i.e., Air France-KLM and Norwegian Air go up and down completely randomly.
Pair Corralation between Air France-KLM and Norwegian Air
Assuming the 90 days horizon Air France KLM SA is expected to under-perform the Norwegian Air. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air France KLM SA is 2.6 times less risky than Norwegian Air. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Norwegian Air Shuttle is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 109.00 in Norwegian Air Shuttle on August 31, 2024 and sell it today you would lose (6.00) from holding Norwegian Air Shuttle or give up 5.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air France KLM SA vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Air France KLM |
| Norwegian Air Shuttle |
Air France-KLM and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air France-KLM and Norwegian Air
The main advantage of trading using opposite Air France-KLM and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air France-KLM 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.| Air France-KLM vs. Cebu Air | Air France-KLM vs. easyJet plc | Air France-KLM vs. Norse Atlantic ASA | Air France-KLM vs. Air China Limited |
| Norwegian Air vs. Cebu Air | Norwegian Air vs. Air France KLM SA | Norwegian Air vs. easyJet plc | Norwegian Air vs. Norse Atlantic ASA |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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