Correlation Between Elmos Semiconductor and Norwegian Air

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

By analyzing existing cross correlation between Elmos Semiconductor SE and Norwegian Air Shuttle, you can compare the effects of market volatilities on Elmos Semiconductor 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 Elmos Semiconductor with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elmos Semiconductor and Norwegian Air.

Diversification Opportunities for Elmos Semiconductor and Norwegian Air

-0.46

Correlation Coefficient

Elmos Semiconductor  Norwegian Air

Very good diversification

The 3 months correlation between Elmos and Norwegian is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Elmos Semiconductor SE and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle and Elmos Semiconductor 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 Elmos Semiconductor SE 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 Shuttle has no effect on the direction of Elmos Semiconductor i.e., Elmos Semiconductor and Norwegian Air go up and down completely randomly.

Pair Corralation between Elmos Semiconductor and Norwegian Air

Assuming the 90 days trading horizon Elmos Semiconductor SE is expected to under-perform the Norwegian Air. But the stock apears to be less risky and, when comparing its historical volatility, Elmos Semiconductor SE is 1.38 times less risky than Norwegian Air. The stock trades about -0.08 of its potential returns per unit of risk. The Norwegian Air Shuttle is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Norwegian Air Shuttle on December 2, 2024 and sell it today you would earn a total of  9.00  from holding Norwegian Air Shuttle or generate 9.89% return on investment over 90 days.

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

Elmos Semiconductor SE  vs.  Norwegian Air Shuttle

Elmos Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elmos Semiconductor SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Elmos Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Norwegian Air Shuttle

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Air Shuttle are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Norwegian Air may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Elmos Semiconductor and Norwegian Air

The main advantage of trading using opposite Elmos Semiconductor and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elmos Semiconductor 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 Elmos Semiconductor SE and Norwegian Air Shuttle 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.