Correlation Between Norwegian Air and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and NorAm Drilling 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 NorAm Drilling 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 NorAm Drilling AS, you can compare the effects of market volatilities on Norwegian Air and NorAm Drilling 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 NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and NorAm Drilling.
Diversification Opportunities for Norwegian Air and NorAm Drilling
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Norwegian and NorAm is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Norwegian Air i.e., Norwegian Air and NorAm Drilling go up and down completely randomly.
Pair Corralation between Norwegian Air and NorAm Drilling
Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 0.72 times more return on investment than NorAm Drilling. However, Norwegian Air Shuttle is 1.38 times less risky than NorAm Drilling. It trades about 0.03 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.01 per unit of risk. If you would invest 94.00 in Norwegian Air Shuttle on August 25, 2024 and sell it today you would earn a total of 1.00 from holding Norwegian Air Shuttle or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. NorAm Drilling AS
Performance |
| Timeline |
| Norwegian Air Shuttle |
| NorAm Drilling AS |
Norwegian Air and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and NorAm Drilling
The main advantage of trading using opposite Norwegian Air and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, NorAm Drilling 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| Norwegian Air vs. Airports of Thailand | Norwegian Air vs. Airports of Thailand | Norwegian Air vs. Aena SME SA | Norwegian Air vs. AerCap Holdings NV |
| NorAm Drilling vs. Norwegian Air Shuttle | NorAm Drilling vs. WIZZ AIR HLDGUNSPADR4 | NorAm Drilling vs. LAir Liquide SA | NorAm Drilling vs. Fair Isaac Corp |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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