Correlation Between Norwegian Air and Rightmove PLC

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

Diversification Opportunities for Norwegian Air and Rightmove PLC

0.39

Correlation Coefficient

Norwegian Air  Rightmove PLC

Weak diversification

The 3 months correlation between Norwegian and Rightmove is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Rightmove PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rightmove PLC 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 Rightmove PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rightmove PLC has no effect on the direction of Norwegian Air i.e., Norwegian Air and Rightmove PLC go up and down completely randomly.

Pair Corralation between Norwegian Air and Rightmove PLC

Assuming the 90 days trading horizon Norwegian Air is expected to generate 1.36 times less return on investment than Rightmove PLC. In addition to that, Norwegian Air is 1.24 times more volatile than Rightmove PLC. It trades about 0.03 of its total potential returns per unit of risk. Rightmove PLC is currently generating about 0.04 per unit of volatility. If you would invest  53,994  in Rightmove PLC on September 28, 2024 and sell it today you would earn a total of  11,926  from holding Rightmove PLC or generate 22.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Norwegian Air Shuttle  vs.  Rightmove PLC

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Rightmove PLC

Risk-Adjusted Performance

7 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rightmove PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Rightmove PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Norwegian Air and Rightmove PLC

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

The idea behind Norwegian Air Shuttle and Rightmove PLC 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.

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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.