Correlation Between Norwegian Air and EAM Solar
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and EAM Solar 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 Norwegian Air and EAM Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norwegian Air Shuttle and EAM Solar ASA, you can compare the effects of market volatilities on Norwegian Air and EAM Solar 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 Norwegian Air with a short position of EAM Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and EAM Solar.
Diversification Opportunities for Norwegian Air and EAM Solar
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Norwegian and EAM is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and EAM Solar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAM Solar ASA and Norwegian Air 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 Norwegian Air Shuttle are associated (or correlated) with EAM Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAM Solar ASA has no effect on the direction of Norwegian Air i.e., Norwegian Air and EAM Solar go up and down completely randomly.
Pair Corralation between Norwegian Air and EAM Solar
Assuming the 90 days trading horizon Norwegian Air is expected to generate 14.3 times less return on investment than EAM Solar. But when comparing it to its historical volatility, Norwegian Air Shuttle is 12.14 times less risky than EAM Solar. It trades about 0.04 of its potential returns per unit of risk. EAM Solar ASA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 586.00 in EAM Solar ASA on September 14, 2024 and sell it today you would lose (570.00) from holding EAM Solar ASA or give up 97.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. EAM Solar ASA
Performance |
| Timeline |
| Norwegian Air Shuttle |
| EAM Solar ASA |
Norwegian Air and EAM Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and EAM Solar
The main advantage of trading using opposite Norwegian Air and EAM Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, EAM Solar 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 EAM Solar will offset losses from the drop in EAM Solar's long position.| Norwegian Air vs. Danske Bank AS | Norwegian Air vs. Kongsberg Automotive Holding | Norwegian Air vs. Nel ASA |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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