Correlation Between Amazon and NORWEGIAN AIR

Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and NORWEGIAN AIR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amazon Inc and NORWEGIAN AIR SHUT, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of NORWEGIAN AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and NORWEGIAN AIR.

Diversification Opportunities for Amazon and NORWEGIAN AIR

-0.28

Correlation Coefficient

Amazon  NORWEGIAN AIR

Very good diversification

The 3 months correlation between Amazon and NORWEGIAN is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and NORWEGIAN AIR SHUT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORWEGIAN AIR SHUT and Amazon 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 Amazon Inc 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 SHUT has no effect on the direction of Amazon i.e., Amazon and NORWEGIAN AIR go up and down completely randomly.

Pair Corralation between Amazon and NORWEGIAN AIR

Assuming the 90 days trading horizon Amazon is expected to generate 24.23 times less return on investment than NORWEGIAN AIR. But when comparing it to its historical volatility, Amazon Inc is 1.72 times less risky than NORWEGIAN AIR. It trades about 0.0 of its potential returns per unit of risk. NORWEGIAN AIR SHUT is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  91.00  in NORWEGIAN AIR SHUT on December 2, 2024 and sell it today you would earn a total of  6.00  from holding NORWEGIAN AIR SHUT or generate 6.59% return on investment over 90 days.

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

Amazon Inc  vs.  NORWEGIAN AIR SHUT

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Amazon is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NORWEGIAN AIR SHUT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NORWEGIAN AIR SHUT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NORWEGIAN AIR may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Amazon and NORWEGIAN AIR

The main advantage of trading using opposite Amazon and NORWEGIAN AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.

The idea behind Amazon Inc and NORWEGIAN AIR SHUT 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.