Correlation Between Norwegian Air and NexGen Energy

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

Diversification Opportunities for Norwegian Air and NexGen Energy

-0.27

Correlation Coefficient

Norwegian Air  NexGen Energy

Very good diversification

The 3 months correlation between Norwegian and NexGen is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy 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 NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of Norwegian Air i.e., Norwegian Air and NexGen Energy go up and down completely randomly.

Pair Corralation between Norwegian Air and NexGen Energy

Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 0.74 times more return on investment than NexGen Energy. However, Norwegian Air Shuttle is 1.35 times less risky than NexGen Energy. It trades about -0.04 of its potential returns per unit of risk. NexGen Energy is currently generating about -0.29 per unit of risk. If you would invest  97.00  in Norwegian Air Shuttle on September 29, 2024 and sell it today you would lose (2.00) from holding Norwegian Air Shuttle or give up 2.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Norwegian Air Shuttle  vs.  NexGen Energy

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 unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NexGen Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NexGen Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norwegian Air and NexGen Energy

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

The idea behind Norwegian Air Shuttle and NexGen Energy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.