Correlation Between Norwegian Air and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES, you can compare the effects of market volatilities on Norwegian Air and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and NORTHEAST UTILITIES.
Diversification Opportunities for Norwegian Air and NORTHEAST UTILITIES
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Norwegian and NORTHEAST is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHEAST UTILITIES has no effect on the direction of Norwegian Air i.e., Norwegian Air and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between Norwegian Air and NORTHEAST UTILITIES
Assuming the 90 days horizon Norwegian Air Shuttle is expected to under-perform the NORTHEAST UTILITIES. In addition to that, Norwegian Air is 3.16 times more volatile than NORTHEAST UTILITIES. It trades about -0.05 of its total potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about 0.08 per unit of volatility. If you would invest 5,434 in NORTHEAST UTILITIES on August 31, 2024 and sell it today you would earn a total of 616.00 from holding NORTHEAST UTILITIES or generate 11.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.23% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. NORTHEAST UTILITIES
Performance |
| Timeline |
| Norwegian Air Shuttle |
| NORTHEAST UTILITIES |
Norwegian Air and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and NORTHEAST UTILITIES
The main advantage of trading using opposite Norwegian Air and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, NORTHEAST UTILITIES 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 NORTHEAST UTILITIES will offset losses from the drop in NORTHEAST UTILITIES'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 |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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