Correlation Between Norwegian Air and Preferred Bank
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Preferred Bank 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 Preferred Bank 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 Preferred Bank, you can compare the effects of market volatilities on Norwegian Air and Preferred Bank 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 Preferred Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Preferred Bank.
Diversification Opportunities for Norwegian Air and Preferred Bank
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Norwegian and Preferred is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank 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 Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of Norwegian Air i.e., Norwegian Air and Preferred Bank go up and down completely randomly.
Pair Corralation between Norwegian Air and Preferred Bank
Assuming the 90 days horizon Norwegian Air Shuttle is expected to under-perform the Preferred Bank. In addition to that, Norwegian Air is 2.01 times more volatile than Preferred Bank. It trades about -0.07 of its total potential returns per unit of risk. Preferred Bank is currently generating about -0.03 per unit of volatility. If you would invest 8,175 in Preferred Bank on October 28, 2024 and sell it today you would lose (75.00) from holding Preferred Bank or give up 0.92% 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. Preferred Bank
Performance |
| Timeline |
| Norwegian Air Shuttle |
| Preferred Bank |
Norwegian Air and Preferred Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and Preferred Bank
The main advantage of trading using opposite Norwegian Air and Preferred Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Preferred Bank 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 Preferred Bank will offset losses from the drop in Preferred Bank's long position.| Norwegian Air vs. CHRYSALIS INVESTMENTS LTD | Norwegian Air vs. United Rentals | Norwegian Air vs. Carsales | Norwegian Air vs. Virtus Investment Partners |
| Preferred Bank vs. CARDINAL HEALTH | Preferred Bank vs. Kingdee International Software | Preferred Bank vs. US Physical Therapy | Preferred Bank vs. Acadia Healthcare |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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