Correlation Between Alaska Air and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Alaska Air 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 Alaska Air and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Air Group and Norwegian Air Shuttle, you can compare the effects of market volatilities on Alaska Air 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 Alaska Air with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Norwegian Air.
Diversification Opportunities for Alaska Air and Norwegian Air
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Alaska and Norwegian is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group 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 Alaska Air 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 Alaska Air Group 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 Alaska Air i.e., Alaska Air and Norwegian Air go up and down completely randomly.
Pair Corralation between Alaska Air and Norwegian Air
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 0.69 times more return on investment than Norwegian Air. However, Alaska Air Group is 1.46 times less risky than Norwegian Air. It trades about 0.35 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.01 per unit of risk. If you would invest 4,193 in Alaska Air Group on August 25, 2024 and sell it today you would earn a total of 839.00 from holding Alaska Air Group or generate 20.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Alaska Air Group |
| Norwegian Air Shuttle |
Alaska Air and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Norwegian Air
The main advantage of trading using opposite Alaska Air and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air 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 Alaska Air Group 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. AUST AGRICULTURAL | Norwegian Air vs. TITAN MACHINERY | Norwegian Air vs. Federal Agricultural Mortgage | Norwegian Air vs. Hitachi Construction Machinery |
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 CEOs Directory module to screen CEOs from public companies around the world.
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