Correlation Between Norwegian Air and SWISS WATER

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

Diversification Opportunities for Norwegian Air and SWISS WATER

-0.23

Correlation Coefficient

Norwegian Air  SWISS WATER

Very good diversification

The 3 months correlation between Norwegian and SWISS is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and SWISS WATER DECAFFCOFFEE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWISS WATER DECAFFCOFFEE 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 SWISS WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWISS WATER DECAFFCOFFEE has no effect on the direction of Norwegian Air i.e., Norwegian Air and SWISS WATER go up and down completely randomly.

Pair Corralation between Norwegian Air and SWISS WATER

Assuming the 90 days horizon Norwegian Air Shuttle is expected to under-perform the SWISS WATER. In addition to that, Norwegian Air is 1.1 times more volatile than SWISS WATER DECAFFCOFFEE. It trades about -0.02 of its total potential returns per unit of risk. SWISS WATER DECAFFCOFFEE is currently generating about 0.04 per unit of volatility. If you would invest  240.00  in SWISS WATER DECAFFCOFFEE on October 9, 2024 and sell it today you would earn a total of  10.00  from holding SWISS WATER DECAFFCOFFEE or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Norwegian Air Shuttle  vs.  SWISS WATER DECAFFCOFFEE

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 nearly stable basic indicators, Norwegian Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SWISS WATER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Norwegian Air and SWISS WATER

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

The idea behind Norwegian Air Shuttle and SWISS WATER DECAFFCOFFEE 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..