Correlation Between Goodtech and Norwegian Air

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

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

Diversification Opportunities for Goodtech and Norwegian Air

-0.01

Correlation Coefficient

Goodtech  Norwegian Air

Good diversification

The 3 months correlation between Goodtech and Norwegian is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Goodtech 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 Goodtech 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 Goodtech 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 Goodtech i.e., Goodtech and Norwegian Air go up and down completely randomly.

Pair Corralation between Goodtech and Norwegian Air

Assuming the 90 days trading horizon Goodtech is expected to generate 0.85 times more return on investment than Norwegian Air. However, Goodtech is 1.17 times less risky than Norwegian Air. It trades about 0.02 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about 0.01 per unit of risk. If you would invest  837.00  in Goodtech on October 27, 2024 and sell it today you would earn a total of  123.00  from holding Goodtech or generate 14.7% return on investment over 90 days.

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

Goodtech  vs.  Norwegian Air Shuttle

Goodtech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodtech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Goodtech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Norwegian Air Shuttle

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Air Shuttle are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Norwegian Air may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Goodtech and Norwegian Air

The main advantage of trading using opposite Goodtech and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodtech 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 Goodtech 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 Commodity Directory module to find actively traded commodities issued by global exchanges.