Correlation Between Norse Atlantic and China Southern
Can any of the company-specific risk be diversified away by investing in both Norse Atlantic and China Southern 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 Norse Atlantic and China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norse Atlantic ASA and China Southern Airlines, you can compare the effects of market volatilities on Norse Atlantic and China Southern 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 Norse Atlantic with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norse Atlantic and China Southern.
Diversification Opportunities for Norse Atlantic and China Southern
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norse and China is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Norse Atlantic ASA and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines and Norse Atlantic 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 Norse Atlantic ASA are associated (or correlated) with China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of Norse Atlantic i.e., Norse Atlantic and China Southern go up and down completely randomly.
Pair Corralation between Norse Atlantic and China Southern
Assuming the 90 days horizon Norse Atlantic ASA is expected to under-perform the China Southern. In addition to that, Norse Atlantic is 1.4 times more volatile than China Southern Airlines. It trades about -0.02 of its total potential returns per unit of risk. China Southern Airlines is currently generating about 0.0 per unit of volatility. If you would invest 65.00 in China Southern Airlines on November 2, 2024 and sell it today you would lose (19.00) from holding China Southern Airlines or give up 29.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Norse Atlantic ASA vs. China Southern Airlines
Performance |
| Timeline |
| Norse Atlantic ASA |
| China Southern Airlines |
Norse Atlantic and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norse Atlantic and China Southern
The main advantage of trading using opposite Norse Atlantic and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norse Atlantic position performs unexpectedly, China Southern 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 China Southern will offset losses from the drop in China Southern's long position.| Norse Atlantic vs. Finnair Oyj | Norse Atlantic vs. easyJet plc | Norse Atlantic vs. Air New Zealand | Norse Atlantic vs. Air China Limited |
| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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