Correlation Between European Metals and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both European 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 European 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 European Metals Holdings and Norwegian Air Shuttle, you can compare the effects of market volatilities on European 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 European Metals with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Norwegian Air.
Diversification Opportunities for European Metals and Norwegian Air
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between European and Norwegian is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings 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 European 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 European Metals Holdings 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 European Metals i.e., European Metals and Norwegian Air go up and down completely randomly.
Pair Corralation between European Metals and Norwegian Air
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Norwegian Air. In addition to that, European Metals is 1.36 times more volatile than Norwegian Air Shuttle. It trades about -0.07 of its total potential returns per unit of risk. Norwegian Air Shuttle is currently generating about 0.04 per unit of volatility. If you would invest 778.00 in Norwegian Air Shuttle on September 3, 2024 and sell it today you would earn a total of 296.00 from holding Norwegian Air Shuttle or generate 38.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Metals Holdings vs. Norwegian Air Shuttle
Performance |
| Timeline |
| European Metals Holdings |
| Norwegian Air Shuttle |
European Metals and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Norwegian Air
The main advantage of trading using opposite European Metals and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European 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.| European Metals vs. Virgin Wines UK | European Metals vs. UNIQA Insurance Group | European Metals vs. CompuGroup Medical AG | European Metals vs. Fresenius Medical Care |
| Norwegian Air vs. Catalyst Media Group | Norwegian Air vs. CATLIN GROUP | Norwegian Air vs. RTW Venture Fund | Norwegian Air vs. Secure Property Development |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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