Correlation Between TEXAS ROADHOUSE and NORWEGIAN AIR
Can any of the company-specific risk be diversified away by investing in both TEXAS ROADHOUSE 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 TEXAS ROADHOUSE and NORWEGIAN AIR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TEXAS ROADHOUSE and NORWEGIAN AIR SHUT, you can compare the effects of market volatilities on TEXAS ROADHOUSE 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 TEXAS ROADHOUSE with a short position of NORWEGIAN AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of TEXAS ROADHOUSE and NORWEGIAN AIR.
Diversification Opportunities for TEXAS ROADHOUSE and NORWEGIAN AIR
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between TEXAS and NORWEGIAN is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding TEXAS ROADHOUSE and NORWEGIAN AIR SHUT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORWEGIAN AIR SHUT and TEXAS ROADHOUSE 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 TEXAS ROADHOUSE 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 SHUT has no effect on the direction of TEXAS ROADHOUSE i.e., TEXAS ROADHOUSE and NORWEGIAN AIR go up and down completely randomly.
Pair Corralation between TEXAS ROADHOUSE and NORWEGIAN AIR
Assuming the 90 days trading horizon TEXAS ROADHOUSE is expected to under-perform the NORWEGIAN AIR. But the stock apears to be less risky and, when comparing its historical volatility, TEXAS ROADHOUSE is 1.29 times less risky than NORWEGIAN AIR. The stock trades about -0.39 of its potential returns per unit of risk. The NORWEGIAN AIR SHUT is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 91.00 in NORWEGIAN AIR SHUT on October 1, 2024 and sell it today you would earn a total of 2.00 from holding NORWEGIAN AIR SHUT or generate 2.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TEXAS ROADHOUSE vs. NORWEGIAN AIR SHUT
Performance |
| Timeline |
| TEXAS ROADHOUSE |
| NORWEGIAN AIR SHUT |
TEXAS ROADHOUSE and NORWEGIAN AIR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TEXAS ROADHOUSE and NORWEGIAN AIR
The main advantage of trading using opposite TEXAS ROADHOUSE and NORWEGIAN AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TEXAS ROADHOUSE 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.The idea behind TEXAS ROADHOUSE and NORWEGIAN AIR SHUT pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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