Correlation Between Norwegian Air and GSTechnologies

Can any of the company-specific risk be diversified away by investing in both Norwegian Air and GSTechnologies 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 GSTechnologies 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 GSTechnologies, you can compare the effects of market volatilities on Norwegian Air and GSTechnologies 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 GSTechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and GSTechnologies.

Diversification Opportunities for Norwegian Air and GSTechnologies

-0.16

Correlation Coefficient

Norwegian Air  GSTechnologies

Good diversification

The 3 months correlation between Norwegian and GSTechnologies is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and GSTechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSTechnologies 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 GSTechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSTechnologies has no effect on the direction of Norwegian Air i.e., Norwegian Air and GSTechnologies go up and down completely randomly.

Pair Corralation between Norwegian Air and GSTechnologies

Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to under-perform the GSTechnologies. But the stock apears to be less risky and, when comparing its historical volatility, Norwegian Air Shuttle is 2.9 times less risky than GSTechnologies. The stock trades about -0.01 of its potential returns per unit of risk. The GSTechnologies is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  67.00  in GSTechnologies on October 7, 2024 and sell it today you would earn a total of  263.00  from holding GSTechnologies or generate 392.54% 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.  GSTechnologies

Norwegian Air Shuttle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norwegian Air Shuttle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Norwegian Air is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

GSTechnologies

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GSTechnologies are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GSTechnologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norwegian Air and GSTechnologies

The main advantage of trading using opposite Norwegian Air and GSTechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, GSTechnologies 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 GSTechnologies will offset losses from the drop in GSTechnologies' long position.

The idea behind Norwegian Air Shuttle and GSTechnologies 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.