Correlation Between Spirent Communications and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Spirent Communications 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 Spirent Communications and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirent Communications plc and Norwegian Air Shuttle, you can compare the effects of market volatilities on Spirent Communications 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 Spirent Communications with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Norwegian Air.
Diversification Opportunities for Spirent Communications and Norwegian Air
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Spirent and Norwegian is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc 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 Spirent Communications 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 Spirent Communications plc 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 Spirent Communications i.e., Spirent Communications and Norwegian Air go up and down completely randomly.
Pair Corralation between Spirent Communications and Norwegian Air
Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.48 times more return on investment than Norwegian Air. However, Spirent Communications plc is 2.08 times less risky than Norwegian Air. It trades about 0.15 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.06 per unit of risk. If you would invest 17,130 in Spirent Communications plc on October 30, 2024 and sell it today you would earn a total of 980.00 from holding Spirent Communications plc or generate 5.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Spirent Communications |
| Norwegian Air Shuttle |
Spirent Communications and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Norwegian Air
The main advantage of trading using opposite Spirent Communications and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications 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.| Spirent Communications vs. XLMedia PLC | Spirent Communications vs. Zoom Video Communications | Spirent Communications vs. Intermediate Capital Group | Spirent Communications vs. G5 Entertainment AB |
| Norwegian Air vs. Foresight Environmental Infrastructure | Norwegian Air vs. Southwest Airlines Co | Norwegian Air vs. Cairn Homes PLC | Norwegian Air vs. American Homes 4 |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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