Correlation Between Norwegian Air and SBM OFFSHORE
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and SBM OFFSHORE 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 SBM OFFSHORE 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 SBM OFFSHORE, you can compare the effects of market volatilities on Norwegian Air and SBM OFFSHORE 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 SBM OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and SBM OFFSHORE.
Diversification Opportunities for Norwegian Air and SBM OFFSHORE
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Norwegian and SBM is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of Norwegian Air i.e., Norwegian Air and SBM OFFSHORE go up and down completely randomly.
Pair Corralation between Norwegian Air and SBM OFFSHORE
Assuming the 90 days horizon Norwegian Air is expected to generate 1.67 times less return on investment than SBM OFFSHORE. In addition to that, Norwegian Air is 2.07 times more volatile than SBM OFFSHORE. It trades about 0.02 of its total potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.07 per unit of volatility. If you would invest 1,214 in SBM OFFSHORE on August 28, 2024 and sell it today you would earn a total of 562.00 from holding SBM OFFSHORE or generate 46.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.72% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. SBM OFFSHORE
Performance |
| Timeline |
| Norwegian Air Shuttle |
| SBM OFFSHORE |
Norwegian Air and SBM OFFSHORE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and SBM OFFSHORE
The main advantage of trading using opposite Norwegian Air and SBM OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, SBM OFFSHORE 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 SBM OFFSHORE will offset losses from the drop in SBM OFFSHORE's long position.| Norwegian Air vs. URBAN OUTFITTERS | Norwegian Air vs. Public Storage | Norwegian Air vs. Fidelity National Information | Norwegian Air vs. 24SEVENOFFICE GROUP AB |
| SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Microsoft | SBM OFFSHORE vs. Microsoft |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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