Correlation Between CAIRN HOMES and NORWEGIAN AIR
Can any of the company-specific risk be diversified away by investing in both CAIRN HOMES 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 CAIRN HOMES and NORWEGIAN AIR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAIRN HOMES EO and NORWEGIAN AIR SHUT, you can compare the effects of market volatilities on CAIRN HOMES 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 CAIRN HOMES with a short position of NORWEGIAN AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAIRN HOMES and NORWEGIAN AIR.
Diversification Opportunities for CAIRN HOMES and NORWEGIAN AIR
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CAIRN and NORWEGIAN is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CAIRN HOMES EO 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 CAIRN HOMES 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 CAIRN HOMES EO 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 CAIRN HOMES i.e., CAIRN HOMES and NORWEGIAN AIR go up and down completely randomly.
Pair Corralation between CAIRN HOMES and NORWEGIAN AIR
Assuming the 90 days horizon CAIRN HOMES EO is expected to under-perform the NORWEGIAN AIR. But the stock apears to be less risky and, when comparing its historical volatility, CAIRN HOMES EO is 1.12 times less risky than NORWEGIAN AIR. The stock trades about -0.16 of its potential returns per unit of risk. The NORWEGIAN AIR SHUT is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 92.00 in NORWEGIAN AIR SHUT on November 3, 2024 and sell it today you would lose (1.00) from holding NORWEGIAN AIR SHUT or give up 1.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CAIRN HOMES EO vs. NORWEGIAN AIR SHUT
Performance |
| Timeline |
| CAIRN HOMES EO |
| NORWEGIAN AIR SHUT |
CAIRN HOMES and NORWEGIAN AIR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAIRN HOMES and NORWEGIAN AIR
The main advantage of trading using opposite CAIRN HOMES and NORWEGIAN AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAIRN HOMES 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.| CAIRN HOMES vs. Commercial Vehicle Group | CAIRN HOMES vs. TERADATA | CAIRN HOMES vs. Nomad Foods | CAIRN HOMES vs. Fevertree Drinks PLC |
| NORWEGIAN AIR vs. MICRONIC MYDATA | NORWEGIAN AIR vs. 24SEVENOFFICE GROUP AB | NORWEGIAN AIR vs. CITIC Telecom International | NORWEGIAN AIR vs. Iridium Communications |
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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