Correlation Between Nordic Mining and Norwegian Air

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

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

Diversification Opportunities for Nordic Mining and Norwegian Air

0.41

Correlation Coefficient

Nordic Mining  Norwegian Air

Very weak diversification

The 3 months correlation between Nordic and Norwegian is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Nordic Mining ASA and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle and Nordic Mining 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 Nordic Mining ASA 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 Shuttle has no effect on the direction of Nordic Mining i.e., Nordic Mining and Norwegian Air go up and down completely randomly.

Pair Corralation between Nordic Mining and Norwegian Air

Assuming the 90 days trading horizon Nordic Mining ASA is expected to generate 1.25 times more return on investment than Norwegian Air. However, Nordic Mining is 1.25 times more volatile than Norwegian Air Shuttle. It trades about -0.07 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.12 per unit of risk. If you would invest  2,493  in Nordic Mining ASA on October 12, 2024 and sell it today you would lose (77.00) from holding Nordic Mining ASA or give up 3.09% of portfolio value over 90 days.

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

Nordic Mining ASA  vs.  Norwegian Air Shuttle

Nordic Mining ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Nordic Mining and Norwegian Air

The main advantage of trading using opposite Nordic Mining and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordic Mining 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 Nordic Mining ASA and Norwegian Air Shuttle 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.