Correlation Between Kongsberg Automotive and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Kongsberg Automotive 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 Kongsberg Automotive and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kongsberg Automotive Holding and Norwegian Air Shuttle, you can compare the effects of market volatilities on Kongsberg Automotive 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 Kongsberg Automotive with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kongsberg Automotive and Norwegian Air.
Diversification Opportunities for Kongsberg Automotive and Norwegian Air
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Kongsberg and Norwegian is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Kongsberg Automotive Holding 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 Kongsberg Automotive 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 Kongsberg Automotive Holding 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 Kongsberg Automotive i.e., Kongsberg Automotive and Norwegian Air go up and down completely randomly.
Pair Corralation between Kongsberg Automotive and Norwegian Air
Assuming the 90 days trading horizon Kongsberg Automotive Holding is expected to generate 1.31 times more return on investment than Norwegian Air. However, Kongsberg Automotive is 1.31 times more volatile than Norwegian Air Shuttle. It trades about 0.11 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about 0.04 per unit of risk. If you would invest 138.00 in Kongsberg Automotive Holding on November 1, 2024 and sell it today you would earn a total of 27.00 from holding Kongsberg Automotive Holding or generate 19.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kongsberg Automotive Holding vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Kongsberg Automotive |
| Norwegian Air Shuttle |
Kongsberg Automotive and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kongsberg Automotive and Norwegian Air
The main advantage of trading using opposite Kongsberg Automotive and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kongsberg Automotive 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.The idea behind Kongsberg Automotive Holding and Norwegian Air Shuttle pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Norwegian Air vs. Danske Bank AS | Norwegian Air vs. Kongsberg Automotive Holding | Norwegian Air vs. Nel 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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