Correlation Between LAir Liquide and NORWEGIAN AIR
Can any of the company-specific risk be diversified away by investing in both LAir Liquide 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 LAir Liquide and NORWEGIAN AIR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAir Liquide SA and NORWEGIAN AIR SHUT, you can compare the effects of market volatilities on LAir Liquide 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 LAir Liquide with a short position of NORWEGIAN AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and NORWEGIAN AIR.
Diversification Opportunities for LAir Liquide and NORWEGIAN AIR
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LAir and NORWEGIAN is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and NORWEGIAN AIR SHUT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORWEGIAN AIR SHUT and LAir Liquide 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 LAir Liquide 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 SHUT has no effect on the direction of LAir Liquide i.e., LAir Liquide and NORWEGIAN AIR go up and down completely randomly.
Pair Corralation between LAir Liquide and NORWEGIAN AIR
Assuming the 90 days trading horizon LAir Liquide is expected to generate 14.1 times less return on investment than NORWEGIAN AIR. But when comparing it to its historical volatility, LAir Liquide SA is 3.24 times less risky than NORWEGIAN AIR. It trades about 0.04 of its potential returns per unit of risk. NORWEGIAN AIR SHUT is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 92.00 in NORWEGIAN AIR SHUT on September 13, 2024 and sell it today you would earn a total of 8.00 from holding NORWEGIAN AIR SHUT or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LAir Liquide SA vs. NORWEGIAN AIR SHUT
Performance |
| Timeline |
| LAir Liquide SA |
| NORWEGIAN AIR SHUT |
LAir Liquide and NORWEGIAN AIR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAir Liquide and NORWEGIAN AIR
The main advantage of trading using opposite LAir Liquide and NORWEGIAN AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide 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.| LAir Liquide vs. Apple Inc | LAir Liquide vs. Apple Inc | LAir Liquide vs. Apple Inc | LAir Liquide vs. Apple Inc |
| NORWEGIAN AIR vs. Apple Inc | NORWEGIAN AIR vs. Apple Inc | NORWEGIAN AIR vs. Apple Inc | NORWEGIAN AIR vs. Apple Inc |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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