Correlation Between Norwegian Air and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Japan Tobacco 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 Japan Tobacco 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 Japan Tobacco, you can compare the effects of market volatilities on Norwegian Air and Japan Tobacco 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 Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Japan Tobacco.
Diversification Opportunities for Norwegian Air and Japan Tobacco
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Norwegian and Japan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan 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 Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco has no effect on the direction of Norwegian Air i.e., Norwegian Air and Japan Tobacco go up and down completely randomly.
Pair Corralation between Norwegian Air and Japan Tobacco
Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 2.17 times more return on investment than Japan Tobacco. However, Norwegian Air is 2.17 times more volatile than Japan Tobacco. It trades about 0.11 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.03 per unit of risk. If you would invest 91.00 in Norwegian Air Shuttle on September 13, 2024 and sell it today you would earn a total of 6.00 from holding Norwegian Air Shuttle or generate 6.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. Japan Tobacco
Performance |
| Timeline |
| Norwegian Air Shuttle |
| Japan Tobacco |
Norwegian Air and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and Japan Tobacco
The main advantage of trading using opposite Norwegian Air and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Japan Tobacco 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 Japan Tobacco will offset losses from the drop in Japan Tobacco's long position.| Norwegian Air vs. Aena SME SA | Norwegian Air vs. Superior Plus Corp | Norwegian Air vs. SIVERS SEMICONDUCTORS AB | Norwegian Air vs. Norsk Hydro ASA |
| Japan Tobacco vs. PARKEN Sport Entertainment | Japan Tobacco vs. Commercial Vehicle Group | Japan Tobacco vs. Motorcar Parts of | Japan Tobacco vs. Carsales |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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