Correlation Between CVS Health and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both CVS Health 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 CVS Health and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Norwegian Air Shuttle, you can compare the effects of market volatilities on CVS Health 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 CVS Health with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Norwegian Air.
Diversification Opportunities for CVS Health and Norwegian Air
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CVS and Norwegian is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health 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 CVS Health 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 CVS Health 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 CVS Health i.e., CVS Health and Norwegian Air go up and down completely randomly.
Pair Corralation between CVS Health and Norwegian Air
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Norwegian Air. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health is 1.33 times less risky than Norwegian Air. The stock trades about -0.04 of its potential returns per unit of risk. The Norwegian Air Shuttle is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 91.00 in Norwegian Air Shuttle on September 13, 2024 and sell it today you would earn a total of 7.00 from holding Norwegian Air Shuttle or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. Norwegian Air Shuttle
Performance |
| Timeline |
| CVS Health |
| Norwegian Air Shuttle |
CVS Health and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Norwegian Air
The main advantage of trading using opposite CVS Health and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health 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.| CVS Health vs. STRAYER EDUCATION | CVS Health vs. LPKF Laser Electronics | CVS Health vs. Renesas Electronics | CVS Health vs. NorAm Drilling AS |
| Norwegian Air vs. Aena SME SA | Norwegian Air vs. Superior Plus Corp | Norwegian Air vs. SIVERS SEMICONDUCTORS AB | Norwegian Air vs. Norsk Hydro ASA |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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