Correlation Between BlueScope Steel and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel 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 BlueScope Steel and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BlueScope Steel Limited and Norwegian Air Shuttle, you can compare the effects of market volatilities on BlueScope Steel 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 BlueScope Steel with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Norwegian Air.
Diversification Opportunities for BlueScope Steel and Norwegian Air
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BlueScope and Norwegian is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited 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 BlueScope Steel 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 BlueScope Steel Limited 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 BlueScope Steel i.e., BlueScope Steel and Norwegian Air go up and down completely randomly.
Pair Corralation between BlueScope Steel and Norwegian Air
Assuming the 90 days horizon BlueScope Steel is expected to generate 1.26 times less return on investment than Norwegian Air. But when comparing it to its historical volatility, BlueScope Steel Limited is 1.72 times less risky than Norwegian Air. It trades about 0.03 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 83.00 in Norwegian Air Shuttle on September 3, 2024 and sell it today you would earn a total of 13.00 from holding Norwegian Air Shuttle or generate 15.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BlueScope Steel Limited vs. Norwegian Air Shuttle
Performance |
| Timeline |
| BlueScope Steel |
| Norwegian Air Shuttle |
BlueScope Steel and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and Norwegian Air
The main advantage of trading using opposite BlueScope Steel and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel 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.| BlueScope Steel vs. ArcelorMittal | BlueScope Steel vs. Steel Dynamics | BlueScope Steel vs. NIPPON STEEL SPADR | BlueScope Steel vs. POSCO Holdings |
| Norwegian Air vs. SHIP HEALTHCARE HLDGINC | Norwegian Air vs. GALENA MINING LTD | Norwegian Air vs. Tianjin Capital Environmental | Norwegian Air vs. BlueScope Steel Limited |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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