Correlation Between Norwegian Air and Sparebanken Ost

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

Diversification Opportunities for Norwegian Air and Sparebanken Ost

0.06

Correlation Coefficient

Norwegian Air  Sparebanken Ost

Significant diversification

The 3 months correlation between Norwegian and Sparebanken is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Sparebanken Ost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebanken Ost 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 Sparebanken Ost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebanken Ost has no effect on the direction of Norwegian Air i.e., Norwegian Air and Sparebanken Ost go up and down completely randomly.

Pair Corralation between Norwegian Air and Sparebanken Ost

Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to under-perform the Sparebanken Ost. In addition to that, Norwegian Air is 4.34 times more volatile than Sparebanken Ost. It trades about -0.13 of its total potential returns per unit of risk. Sparebanken Ost is currently generating about -0.08 per unit of volatility. If you would invest  7,150  in Sparebanken Ost on October 25, 2024 and sell it today you would lose (53.00) from holding Sparebanken Ost or give up 0.74% of portfolio value over 90 days.

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

Norwegian Air Shuttle  vs.  Sparebanken Ost

Norwegian Air Shuttle

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Air Shuttle are ranked lower than 3 (%) 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.

Sparebanken Ost

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebanken Ost are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Sparebanken Ost disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norwegian Air and Sparebanken Ost

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

The idea behind Norwegian Air Shuttle and Sparebanken Ost 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.