Correlation Between Air France-KLM and Norse Atlantic

Can any of the company-specific risk be diversified away by investing in both Air France-KLM and Norse Atlantic 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 Air France-KLM and Norse Atlantic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air France KLM SA and Norse Atlantic ASA, you can compare the effects of market volatilities on Air France-KLM and Norse Atlantic 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 Air France-KLM with a short position of Norse Atlantic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France-KLM and Norse Atlantic.

Diversification Opportunities for Air France-KLM and Norse Atlantic

-0.71

Correlation Coefficient

Air France-KLM  Norse Atlantic

Pay attention - limited upside

The 3 months correlation between Air and Norse is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA and Norse Atlantic ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norse Atlantic ASA and Air France-KLM 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 Air France KLM SA are associated (or correlated) with Norse Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norse Atlantic ASA has no effect on the direction of Air France-KLM i.e., Air France-KLM and Norse Atlantic go up and down completely randomly.

Pair Corralation between Air France-KLM and Norse Atlantic

Assuming the 90 days horizon Air France KLM SA is expected to under-perform the Norse Atlantic. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air France KLM SA is 3.33 times less risky than Norse Atlantic. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Norse Atlantic ASA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Norse Atlantic ASA on September 3, 2024 and sell it today you would earn a total of  13.00  from holding Norse Atlantic ASA or generate 61.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

Air France KLM SA  vs.  Norse Atlantic ASA

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Air France-KLM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Norse Atlantic ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Norse Atlantic ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Norse Atlantic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air France-KLM and Norse Atlantic

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

The idea behind Air France KLM SA and Norse Atlantic ASA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.