Correlation Between Norwegian Air and Kongsberg Automotive
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Kongsberg Automotive 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 Kongsberg Automotive 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 Kongsberg Automotive Holding, you can compare the effects of market volatilities on Norwegian Air and Kongsberg Automotive 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 Kongsberg Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Kongsberg Automotive.
Diversification Opportunities for Norwegian Air and Kongsberg Automotive
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Norwegian and Kongsberg is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Kongsberg Automotive Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kongsberg Automotive 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 Kongsberg Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kongsberg Automotive has no effect on the direction of Norwegian Air i.e., Norwegian Air and Kongsberg Automotive go up and down completely randomly.
Pair Corralation between Norwegian Air and Kongsberg Automotive
Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to generate 1.1 times more return on investment than Kongsberg Automotive. However, Norwegian Air is 1.1 times more volatile than Kongsberg Automotive Holding. It trades about -0.07 of its potential returns per unit of risk. Kongsberg Automotive Holding is currently generating about -0.39 per unit of risk. If you would invest 1,139 in Norwegian Air Shuttle on November 2, 2024 and sell it today you would lose (39.00) from holding Norwegian Air Shuttle or give up 3.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. Kongsberg Automotive Holding
Performance |
| Timeline |
| Norwegian Air Shuttle |
| Kongsberg Automotive |
Norwegian Air and Kongsberg Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and Kongsberg Automotive
The main advantage of trading using opposite Norwegian Air and Kongsberg Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Kongsberg Automotive 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 Kongsberg Automotive will offset losses from the drop in Kongsberg Automotive's long position.| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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