Correlation Between Norwegian Air and British American

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Norwegian Air and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and British American.

Diversification Opportunities for Norwegian Air and British American

0.01
  Correlation Coefficient

Significant diversification

The 3 months correlation between Norwegian and British is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Norwegian Air i.e., Norwegian Air and British American go up and down completely randomly.

Pair Corralation between Norwegian Air and British American

Assuming the 90 days horizon Norwegian Air is expected to generate 1.02 times less return on investment than British American. In addition to that, Norwegian Air is 3.07 times more volatile than British American Tobacco. It trades about 0.02 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.07 per unit of volatility. If you would invest  2,751  in British American Tobacco on August 26, 2024 and sell it today you would earn a total of  765.00  from holding British American Tobacco or generate 27.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Norwegian Air Shuttle  vs.  British American Tobacco

 Performance 
       Timeline  
Norwegian Air Shuttle 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Air Shuttle are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Norwegian Air may actually be approaching a critical reversion point that can send shares even higher in December 2024.
British American Tobacco 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, British American may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Norwegian Air and British American Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Norwegian Air and British American

The main advantage of trading using opposite Norwegian Air and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.
The idea behind Norwegian Air Shuttle and British American Tobacco pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

Other Complementary Tools

Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Financial Widgets
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Global Markets Map
Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance