Correlation Between Norwegian Air and Nordhealth

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Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Nordhealth 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 Nordhealth 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 Nordhealth AS, you can compare the effects of market volatilities on Norwegian Air and Nordhealth 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 Nordhealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Nordhealth.

Diversification Opportunities for Norwegian Air and Nordhealth

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Norwegian and Nordhealth is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Nordhealth AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordhealth AS 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 Nordhealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordhealth AS has no effect on the direction of Norwegian Air i.e., Norwegian Air and Nordhealth go up and down completely randomly.

Pair Corralation between Norwegian Air and Nordhealth

Assuming the 90 days trading horizon Norwegian Air is expected to generate 8.74 times less return on investment than Nordhealth. But when comparing it to its historical volatility, Norwegian Air Shuttle is 1.74 times less risky than Nordhealth. It trades about 0.01 of its potential returns per unit of risk. Nordhealth AS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,190  in Nordhealth AS on October 27, 2024 and sell it today you would earn a total of  1,880  from holding Nordhealth AS or generate 85.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Norwegian Air Shuttle  vs.  Nordhealth AS

 Performance 
       Timeline  
Norwegian Air Shuttle 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
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.
Nordhealth AS 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Nordhealth AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Nordhealth displayed solid returns over the last few months and may actually be approaching a breakup point.

Norwegian Air and Nordhealth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Norwegian Air and Nordhealth

The main advantage of trading using opposite Norwegian Air and Nordhealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Nordhealth 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 Nordhealth will offset losses from the drop in Nordhealth's long position.
The idea behind Norwegian Air Shuttle and Nordhealth AS 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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