Correlation Between Capital Metals and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Capital Metals 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 Metals 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 Metals PLC and Norwegian Air Shuttle, you can compare the effects of market volatilities on Capital Metals 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 Metals with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Metals and Norwegian Air.
Diversification Opportunities for Capital Metals and Norwegian Air
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Capital and Norwegian is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Capital Metals PLC 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 Metals 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 Metals PLC 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 Metals i.e., Capital Metals and Norwegian Air go up and down completely randomly.
Pair Corralation between Capital Metals and Norwegian Air
Assuming the 90 days trading horizon Capital Metals PLC is expected to under-perform the Norwegian Air. In addition to that, Capital Metals is 2.08 times more volatile than Norwegian Air Shuttle. It trades about -0.08 of its total potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.03 per unit of volatility. If you would invest 1,401 in Norwegian Air Shuttle on August 28, 2024 and sell it today you would lose (276.00) from holding Norwegian Air Shuttle or give up 19.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Metals PLC vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Capital Metals PLC |
| Norwegian Air Shuttle |
Capital Metals and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Metals and Norwegian Air
The main advantage of trading using opposite Capital Metals and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Metals 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 Metals vs. Givaudan SA | Capital Metals vs. Antofagasta PLC | Capital Metals vs. Centamin PLC | Capital Metals vs. Atalaya Mining |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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