Correlation Between Norwegian Air and CLEAN ENERGY
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and CLEAN ENERGY 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 CLEAN ENERGY 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 CLEAN ENERGY FUELS, you can compare the effects of market volatilities on Norwegian Air and CLEAN ENERGY 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 CLEAN ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and CLEAN ENERGY.
Diversification Opportunities for Norwegian Air and CLEAN ENERGY
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norwegian and CLEAN is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and CLEAN ENERGY FUELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLEAN ENERGY FUELS 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 CLEAN ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLEAN ENERGY FUELS has no effect on the direction of Norwegian Air i.e., Norwegian Air and CLEAN ENERGY go up and down completely randomly.
Pair Corralation between Norwegian Air and CLEAN ENERGY
Assuming the 90 days horizon Norwegian Air Shuttle is expected to under-perform the CLEAN ENERGY. But the stock apears to be less risky and, when comparing its historical volatility, Norwegian Air Shuttle is 1.13 times less risky than CLEAN ENERGY. The stock trades about -0.05 of its potential returns per unit of risk. The CLEAN ENERGY FUELS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 252.00 in CLEAN ENERGY FUELS on November 1, 2024 and sell it today you would earn a total of 47.00 from holding CLEAN ENERGY FUELS or generate 18.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. CLEAN ENERGY FUELS
Performance |
| Timeline |
| Norwegian Air Shuttle |
| CLEAN ENERGY FUELS |
Norwegian Air and CLEAN ENERGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and CLEAN ENERGY
The main advantage of trading using opposite Norwegian Air and CLEAN ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, CLEAN ENERGY 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 CLEAN ENERGY will offset losses from the drop in CLEAN ENERGY's long position.| Norwegian Air vs. Xenia Hotels Resorts | Norwegian Air vs. Wyndham Hotels Resorts | Norwegian Air vs. Meli Hotels International | Norwegian Air vs. Hyatt Hotels |
| CLEAN ENERGY vs. ITALIAN WINE BRANDS | CLEAN ENERGY vs. LAir Liquide SA | CLEAN ENERGY vs. Treasury Wine Estates | CLEAN ENERGY vs. Norwegian Air Shuttle |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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