Correlation Between Highlight Communications and NORWEGIAN AIR

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

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

Diversification Opportunities for Highlight Communications and NORWEGIAN AIR

-0.69

Correlation Coefficient

Highlight Communications  NORWEGIAN AIR

Excellent diversification

The 3 months correlation between Highlight and NORWEGIAN is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG 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 Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and NORWEGIAN AIR go up and down completely randomly.

Pair Corralation between Highlight Communications and NORWEGIAN AIR

Assuming the 90 days trading horizon Highlight Communications is expected to generate 1.64 times less return on investment than NORWEGIAN AIR. In addition to that, Highlight Communications is 2.04 times more volatile than NORWEGIAN AIR SHUT. It trades about 0.01 of its total potential returns per unit of risk. NORWEGIAN AIR SHUT is currently generating about 0.03 per unit of volatility. If you would invest  94.00  in NORWEGIAN AIR SHUT on December 3, 2024 and sell it today you would earn a total of  3.00  from holding NORWEGIAN AIR SHUT or generate 3.19% return on investment over 90 days.

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

Highlight Communications AG  vs.  NORWEGIAN AIR SHUT

Highlight Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highlight Communications AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Highlight Communications is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private 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 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, NORWEGIAN AIR is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Highlight Communications and NORWEGIAN AIR

The main advantage of trading using opposite Highlight Communications and NORWEGIAN AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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 Highlight Communications AG 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.