Correlation Between Light Science and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Light Science 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 Light Science and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Light Science Technologies and Norwegian Air Shuttle, you can compare the effects of market volatilities on Light Science 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 Light Science with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Light Science and Norwegian Air.
Diversification Opportunities for Light Science and Norwegian Air
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Light and Norwegian is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Light Science Technologies 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 Light Science 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 Light Science Technologies 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 Light Science i.e., Light Science and Norwegian Air go up and down completely randomly.
Pair Corralation between Light Science and Norwegian Air
Assuming the 90 days trading horizon Light Science Technologies is expected to under-perform the Norwegian Air. In addition to that, Light Science is 1.18 times more volatile than Norwegian Air Shuttle. It trades about -0.21 of its total potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.24 per unit of volatility. If you would invest 1,112 in Norwegian Air Shuttle on October 16, 2024 and sell it today you would lose (112.00) from holding Norwegian Air Shuttle or give up 10.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Light Science Technologies vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Light Science Techno |
| Norwegian Air Shuttle |
Light Science and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Light Science and Norwegian Air
The main advantage of trading using opposite Light Science and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Light Science 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.| Light Science vs. Flutter Entertainment PLC | Light Science vs. Molson Coors Beverage | Light Science vs. Young Cos Brewery | Light Science vs. XLMedia PLC |
| Norwegian Air vs. Pan American Silver | Norwegian Air vs. Spirent Communications plc | Norwegian Air vs. Charter Communications Cl | Norwegian Air vs. Aeorema Communications Plc |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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