Correlation Between Norwegian Air and Xeros Technology

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

Diversification Opportunities for Norwegian Air and Xeros Technology

-0.43

Correlation Coefficient

Norwegian Air  Xeros Technology

Very good diversification

The 3 months correlation between Norwegian and Xeros is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Xeros Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xeros Technology 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 Xeros Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xeros Technology has no effect on the direction of Norwegian Air i.e., Norwegian Air and Xeros Technology go up and down completely randomly.

Pair Corralation between Norwegian Air and Xeros Technology

Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to generate 0.49 times more return on investment than Xeros Technology. However, Norwegian Air Shuttle is 2.05 times less risky than Xeros Technology. It trades about 0.05 of its potential returns per unit of risk. Xeros Technology Group is currently generating about 0.01 per unit of risk. If you would invest  1,000.00  in Norwegian Air Shuttle on October 25, 2024 and sell it today you would earn a total of  47.00  from holding Norwegian Air Shuttle or generate 4.7% return on investment over 90 days.

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

Norwegian Air Shuttle  vs.  Xeros Technology Group

Norwegian Air Shuttle

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Air Shuttle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Norwegian Air is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Xeros Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xeros Technology Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Xeros Technology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Norwegian Air and Xeros Technology

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

The idea behind Norwegian Air Shuttle and Xeros Technology Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.