Correlation Between Aker BP and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Aker BP 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 Aker BP and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aker BP ASA and Norwegian Air Shuttle, you can compare the effects of market volatilities on Aker BP 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 Aker BP with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker BP and Norwegian Air.
Diversification Opportunities for Aker BP and Norwegian Air
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aker and Norwegian is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA 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 Aker BP 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 Aker BP ASA 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 Aker BP i.e., Aker BP and Norwegian Air go up and down completely randomly.
Pair Corralation between Aker BP and Norwegian Air
Assuming the 90 days trading horizon Aker BP ASA is expected to under-perform the Norwegian Air. But the stock apears to be less risky and, when comparing its historical volatility, Aker BP ASA is 1.67 times less risky than Norwegian Air. The stock trades about 0.0 of its potential returns per unit of risk. The Norwegian Air Shuttle is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,058 in Norwegian Air Shuttle on September 2, 2024 and sell it today you would earn a total of 67.00 from holding Norwegian Air Shuttle or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aker BP ASA vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Aker BP ASA |
| Norwegian Air Shuttle |
Aker BP and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aker BP and Norwegian Air
The main advantage of trading using opposite Aker BP and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker BP 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.The idea behind Aker BP ASA and Norwegian Air Shuttle pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Norwegian Air vs. REC Silicon ASA | Norwegian Air vs. Aker Horizons AS | Norwegian Air vs. Aker BP ASA | Norwegian Air vs. MPC Container Ships |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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