Correlation Between State Bank and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both State Bank 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 State Bank and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Bank of and Norwegian Air Shuttle, you can compare the effects of market volatilities on State Bank 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 State Bank with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and Norwegian Air.
Diversification Opportunities for State Bank and Norwegian Air
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between State and Norwegian is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of 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 State Bank 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 State Bank of 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 State Bank i.e., State Bank and Norwegian Air go up and down completely randomly.
Pair Corralation between State Bank and Norwegian Air
Assuming the 90 days horizon State Bank is expected to generate 1.9 times less return on investment than Norwegian Air. But when comparing it to its historical volatility, State Bank of is 1.2 times less risky than Norwegian Air. It trades about 0.1 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 85.00 in Norwegian Air Shuttle on August 27, 2024 and sell it today you would earn a total of 8.00 from holding Norwegian Air Shuttle or generate 9.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Bank of vs. Norwegian Air Shuttle
Performance |
| Timeline |
| State Bank |
| Norwegian Air Shuttle |
State Bank and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Bank and Norwegian Air
The main advantage of trading using opposite State Bank and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank 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 State Bank of and Norwegian Air Shuttle 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.| Norwegian Air vs. Jacquet Metal Service | Norwegian Air vs. ALTAIR RES INC | Norwegian Air vs. Alaska Air Group | Norwegian Air vs. ADRIATIC METALS LS 013355 |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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