Correlation Between Norwegian Air and Austevoll Seafood

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

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

Diversification Opportunities for Norwegian Air and Austevoll Seafood

0.36

Correlation Coefficient

Norwegian Air  Austevoll Seafood

Weak diversification

The 3 months correlation between Norwegian and Austevoll is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Austevoll Seafood ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austevoll Seafood ASA and Norwegian Air 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 Norwegian Air Shuttle are associated (or correlated) with Austevoll Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austevoll Seafood ASA has no effect on the direction of Norwegian Air i.e., Norwegian Air and Austevoll Seafood go up and down completely randomly.

Pair Corralation between Norwegian Air and Austevoll Seafood

Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to under-perform the Austevoll Seafood. In addition to that, Norwegian Air is 2.22 times more volatile than Austevoll Seafood ASA. It trades about -0.07 of its total potential returns per unit of risk. Austevoll Seafood ASA is currently generating about -0.03 per unit of volatility. If you would invest  9,935  in Austevoll Seafood ASA on October 12, 2024 and sell it today you would lose (245.00) from holding Austevoll Seafood ASA or give up 2.47% of portfolio value over 90 days.

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

Norwegian Air Shuttle  vs.  Austevoll Seafood ASA

Norwegian Air Shuttle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norwegian Air Shuttle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Austevoll Seafood ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Norwegian Air and Austevoll Seafood

The main advantage of trading using opposite Norwegian Air and Austevoll Seafood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Austevoll Seafood 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 Austevoll Seafood will offset losses from the drop in Austevoll Seafood's long position.

The idea behind Norwegian Air Shuttle and Austevoll Seafood ASA 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.