Correlation Between Norwegian Air and Polaris Media

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

Diversification Opportunities for Norwegian Air and Polaris Media

-0.4

Correlation Coefficient

Norwegian Air  Polaris Media

Very good diversification

The 3 months correlation between Norwegian and Polaris is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Polaris Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Media 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 Polaris Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Media has no effect on the direction of Norwegian Air i.e., Norwegian Air and Polaris Media go up and down completely randomly.

Pair Corralation between Norwegian Air and Polaris Media

Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to under-perform the Polaris Media. But the stock apears to be less risky and, when comparing its historical volatility, Norwegian Air Shuttle is 1.62 times less risky than Polaris Media. The stock trades about -0.12 of its potential returns per unit of risk. The Polaris Media is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,700  in Polaris Media on October 12, 2024 and sell it today you would lose (100.00) from holding Polaris Media or give up 1.15% of portfolio value over 90 days.

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

Norwegian Air Shuttle  vs.  Polaris Media

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.

Polaris Media

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Media are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Polaris Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norwegian Air and Polaris Media

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

The idea behind Norwegian Air Shuttle and Polaris Media 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.