Correlation Between Fast Retailing and NORWEGIAN AIR

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

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

Diversification Opportunities for Fast Retailing and NORWEGIAN AIR

0.16

Correlation Coefficient

Fast Retailing  NORWEGIAN AIR

Average diversification

The 3 months correlation between Fast and NORWEGIAN is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co 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 Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and NORWEGIAN AIR go up and down completely randomly.

Pair Corralation between Fast Retailing and NORWEGIAN AIR

Assuming the 90 days trading horizon Fast Retailing is expected to generate 2.03 times less return on investment than NORWEGIAN AIR. But when comparing it to its historical volatility, Fast Retailing Co is 1.37 times less risky than NORWEGIAN AIR. It trades about 0.07 of its potential returns per unit of risk. NORWEGIAN AIR SHUT is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  85.00  in NORWEGIAN AIR SHUT on September 26, 2024 and sell it today you would earn a total of  8.00  from holding NORWEGIAN AIR SHUT or generate 9.41% return on investment over 90 days.

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

Fast Retailing Co  vs.  NORWEGIAN AIR SHUT

Fast Retailing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NORWEGIAN AIR SHUT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORWEGIAN AIR SHUT 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.

Pair Trading with Fast Retailing and NORWEGIAN AIR

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

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.