Correlation Between Capital Drilling and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Capital Drilling 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 Capital Drilling and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Drilling and Norwegian Air Shuttle, you can compare the effects of market volatilities on Capital Drilling 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 Capital Drilling with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Drilling and Norwegian Air.
Diversification Opportunities for Capital Drilling and Norwegian Air
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Capital and Norwegian is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling 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 Capital Drilling 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 Capital Drilling 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 Capital Drilling i.e., Capital Drilling and Norwegian Air go up and down completely randomly.
Pair Corralation between Capital Drilling and Norwegian Air
Assuming the 90 days trading horizon Capital Drilling is expected to under-perform the Norwegian Air. But the stock apears to be less risky and, when comparing its historical volatility, Capital Drilling is 1.01 times less risky than Norwegian Air. The stock trades about -0.07 of its potential returns per unit of risk. The Norwegian Air Shuttle is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 987.00 in Norwegian Air Shuttle on August 29, 2024 and sell it today you would earn a total of 152.00 from holding Norwegian Air Shuttle or generate 15.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Drilling vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Capital Drilling |
| Norwegian Air Shuttle |
Capital Drilling and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Drilling and Norwegian Air
The main advantage of trading using opposite Capital Drilling and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Drilling 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.| Capital Drilling vs. Zoom Video Communications | Capital Drilling vs. Lendinvest PLC | Capital Drilling vs. Neometals | Capital Drilling vs. Coor Service Management |
| Norwegian Air vs. Lendinvest PLC | Norwegian Air vs. Neometals | Norwegian Air vs. Coor Service Management | Norwegian Air vs. Albion Technology General |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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