Correlation Between Air Transport and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Transport 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 Transport Services and Norwegian Air Shuttle, you can compare the effects of market volatilities on Air Transport 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 Transport with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Norwegian Air.
Diversification Opportunities for Air Transport and Norwegian Air
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Air and Norwegian is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services 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 Transport 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 Transport Services 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 Transport i.e., Air Transport and Norwegian Air go up and down completely randomly.
Pair Corralation between Air Transport and Norwegian Air
Assuming the 90 days horizon Air Transport Services is expected to generate 1.09 times more return on investment than Norwegian Air. However, Air Transport is 1.09 times more volatile than Norwegian Air Shuttle. It trades about 0.1 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about 0.0 per unit of risk. If you would invest 1,500 in Air Transport Services on October 25, 2024 and sell it today you would earn a total of 620.00 from holding Air Transport Services or generate 41.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Air Transport Services |
| Norwegian Air Shuttle |
Air Transport and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and Norwegian Air
The main advantage of trading using opposite Air Transport and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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 Transport vs. Carsales | Air Transport vs. AGRICULTBK HADR25 YC | Air Transport vs. Tradeweb Markets | Air Transport vs. Hanison Construction Holdings |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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