Correlation Between Norwegian Air and Xenia Hotels
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Xenia Hotels 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 Xenia Hotels 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 Xenia Hotels Resorts, you can compare the effects of market volatilities on Norwegian Air and Xenia Hotels 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 Xenia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Xenia Hotels.
Diversification Opportunities for Norwegian Air and Xenia Hotels
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norwegian and Xenia is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Xenia Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenia Hotels Resorts 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 Xenia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenia Hotels Resorts has no effect on the direction of Norwegian Air i.e., Norwegian Air and Xenia Hotels go up and down completely randomly.
Pair Corralation between Norwegian Air and Xenia Hotels
Assuming the 90 days horizon Norwegian Air Shuttle is expected to under-perform the Xenia Hotels. In addition to that, Norwegian Air is 1.58 times more volatile than Xenia Hotels Resorts. It trades about -0.03 of its total potential returns per unit of risk. Xenia Hotels Resorts is currently generating about 0.05 per unit of volatility. If you would invest 1,410 in Xenia Hotels Resorts on November 6, 2024 and sell it today you would earn a total of 20.00 from holding Xenia Hotels Resorts or generate 1.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. Xenia Hotels Resorts
Performance |
| Timeline |
| Norwegian Air Shuttle |
| Xenia Hotels Resorts |
Norwegian Air and Xenia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and Xenia Hotels
The main advantage of trading using opposite Norwegian Air and Xenia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Xenia Hotels 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 Xenia Hotels will offset losses from the drop in Xenia Hotels' long position.| Norwegian Air vs. ANTA SPORTS PRODUCT | Norwegian Air vs. DICKS Sporting Goods | Norwegian Air vs. Yuexiu Transport Infrastructure | Norwegian Air vs. Motorcar Parts of |
| Xenia Hotels vs. Host Hotels Resorts | Xenia Hotels vs. Ryman Hospitality Properties | Xenia Hotels vs. Park Hotels Resorts | Xenia Hotels vs. Pebblebrook Hotel Trust |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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