Correlation Between Norwegian Air and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Hitachi Construction 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 Hitachi Construction 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 Hitachi Construction Machinery, you can compare the effects of market volatilities on Norwegian Air and Hitachi Construction 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 Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Hitachi Construction.
Diversification Opportunities for Norwegian Air and Hitachi Construction
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norwegian and Hitachi is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction 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 Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of Norwegian Air i.e., Norwegian Air and Hitachi Construction go up and down completely randomly.
Pair Corralation between Norwegian Air and Hitachi Construction
Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 1.44 times more return on investment than Hitachi Construction. However, Norwegian Air is 1.44 times more volatile than Hitachi Construction Machinery. It trades about 0.1 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.12 per unit of risk. If you would invest 88.00 in Norwegian Air Shuttle on August 31, 2024 and sell it today you would earn a total of 5.00 from holding Norwegian Air Shuttle or generate 5.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. Hitachi Construction Machinery
Performance |
| Timeline |
| Norwegian Air Shuttle |
| Hitachi Construction |
Norwegian Air and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and Hitachi Construction
The main advantage of trading using opposite Norwegian Air and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Hitachi Construction 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 Hitachi Construction will offset losses from the drop in Hitachi Construction's long position.| Norwegian Air vs. United Natural Foods | Norwegian Air vs. Molson Coors Beverage | Norwegian Air vs. JJ SNACK FOODS | Norwegian Air vs. CN MODERN DAIRY |
| Hitachi Construction vs. PARKEN Sport Entertainment | Hitachi Construction vs. FORMPIPE SOFTWARE AB | Hitachi Construction vs. NTG Nordic Transport | Hitachi Construction vs. SPORT LISBOA E |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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