Correlation Between NORTHEAST UTILITIES and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and Norwegian Air 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 NORTHEAST UTILITIES and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Norwegian Air Shuttle, you can compare the effects of market volatilities on NORTHEAST UTILITIES and Norwegian Air 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 NORTHEAST UTILITIES with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Norwegian Air.
Diversification Opportunities for NORTHEAST UTILITIES and Norwegian Air
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NORTHEAST and Norwegian is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES are associated (or correlated) with Norwegian Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Air Shuttle has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Norwegian Air go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and Norwegian Air
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 0.61 times more return on investment than Norwegian Air. However, NORTHEAST UTILITIES is 1.65 times less risky than Norwegian Air. It trades about -0.05 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.07 per unit of risk. If you would invest 5,500 in NORTHEAST UTILITIES on October 26, 2024 and sell it today you would lose (100.00) from holding NORTHEAST UTILITIES or give up 1.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. Norwegian Air Shuttle
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| Norwegian Air Shuttle |
NORTHEAST UTILITIES and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and Norwegian Air
The main advantage of trading using opposite NORTHEAST UTILITIES and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, Norwegian Air 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 Norwegian Air will offset losses from the drop in Norwegian Air's long position.| NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc | NORTHEAST UTILITIES vs. Apple Inc |
| Norwegian Air vs. JAPAN TOBACCO UNSPADR12 | Norwegian Air vs. DATADOT TECHNOLOGY | Norwegian Air vs. IMPERIAL TOBACCO | Norwegian Air vs. Linedata Services SA |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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