Correlation Between Norwegian Air and XXL ASA
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and XXL ASA 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 XXL ASA 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 XXL ASA, you can compare the effects of market volatilities on Norwegian Air and XXL ASA 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 XXL ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and XXL ASA.
Diversification Opportunities for Norwegian Air and XXL ASA
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Norwegian and XXL is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and XXL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XXL 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 XXL ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XXL ASA has no effect on the direction of Norwegian Air i.e., Norwegian Air and XXL ASA go up and down completely randomly.
Pair Corralation between Norwegian Air and XXL ASA
Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to generate 0.38 times more return on investment than XXL ASA. However, Norwegian Air Shuttle is 2.6 times less risky than XXL ASA. It trades about 0.01 of its potential returns per unit of risk. XXL ASA is currently generating about -0.02 per unit of risk. If you would invest 1,158 in Norwegian Air Shuttle on November 9, 2024 and sell it today you would lose (37.00) from holding Norwegian Air Shuttle or give up 3.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. XXL ASA
Performance |
| Timeline |
| Norwegian Air Shuttle |
| XXL ASA |
Norwegian Air and XXL ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and XXL ASA
The main advantage of trading using opposite Norwegian Air and XXL ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, XXL ASA 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 XXL ASA will offset losses from the drop in XXL ASA'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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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