Correlation Between Norwegian Air and Crown Castle

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

Diversification Opportunities for Norwegian Air and Crown Castle

0.48

Correlation Coefficient

Norwegian Air  Crown Castle

Very weak diversification

The 3 months correlation between Norwegian and Crown is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Crown Castle International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Castle Interna 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 Crown Castle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Castle Interna has no effect on the direction of Norwegian Air i.e., Norwegian Air and Crown Castle go up and down completely randomly.

Pair Corralation between Norwegian Air and Crown Castle

Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 1.15 times more return on investment than Crown Castle. However, Norwegian Air is 1.15 times more volatile than Crown Castle International. It trades about -0.22 of its potential returns per unit of risk. Crown Castle International is currently generating about -0.64 per unit of risk. If you would invest  97.00  in Norwegian Air Shuttle on October 4, 2024 and sell it today you would lose (5.00) from holding Norwegian Air Shuttle or give up 5.15% of portfolio value over 90 days.

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

Norwegian Air Shuttle  vs.  Crown Castle International

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Crown Castle Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Castle International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Norwegian Air and Crown Castle

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

The idea behind Norwegian Air Shuttle and Crown Castle International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.