Correlation Between Norwegian Air and Universal Entertainment
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment, you can compare the effects of market volatilities on Norwegian Air and Universal Entertainment 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 Universal Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Universal Entertainment.
Diversification Opportunities for Norwegian Air and Universal Entertainment
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Norwegian and Universal is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Universal Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Entertainment 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 Universal Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Entertainment has no effect on the direction of Norwegian Air i.e., Norwegian Air and Universal Entertainment go up and down completely randomly.
Pair Corralation between Norwegian Air and Universal Entertainment
Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 1.24 times more return on investment than Universal Entertainment. However, Norwegian Air is 1.24 times more volatile than Universal Entertainment. It trades about 0.03 of its potential returns per unit of risk. Universal Entertainment is currently generating about -0.06 per unit of risk. If you would invest 82.00 in Norwegian Air Shuttle on August 30, 2024 and sell it today you would earn a total of 15.00 from holding Norwegian Air Shuttle or generate 18.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. Universal Entertainment
Performance |
| Timeline |
| Norwegian Air Shuttle |
| Universal Entertainment |
Norwegian Air and Universal Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and Universal Entertainment
The main advantage of trading using opposite Norwegian Air and Universal Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Universal Entertainment 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 Universal Entertainment will offset losses from the drop in Universal Entertainment's long position.| Norwegian Air vs. Superior Plus Corp | Norwegian Air vs. NMI Holdings | Norwegian Air vs. SIVERS SEMICONDUCTORS AB | Norwegian Air vs. Talanx AG |
| Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Superior Plus Corp | Universal Entertainment vs. SIVERS SEMICONDUCTORS AB |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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