Correlation Between Norwegian Air and Cal-Maine Foods

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

Diversification Opportunities for Norwegian Air and Cal-Maine Foods

-0.6

Correlation Coefficient

Norwegian Air  Cal-Maine Foods

Excellent diversification

The 3 months correlation between Norwegian and Cal-Maine is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine Foods 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 Cal-Maine Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of Norwegian Air i.e., Norwegian Air and Cal-Maine Foods go up and down completely randomly.

Pair Corralation between Norwegian Air and Cal-Maine Foods

Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 0.93 times more return on investment than Cal-Maine Foods. However, Norwegian Air Shuttle is 1.08 times less risky than Cal-Maine Foods. It trades about 0.04 of its potential returns per unit of risk. Cal Maine Foods is currently generating about -0.02 per unit of risk. If you would invest  96.00  in Norwegian Air Shuttle on December 4, 2024 and sell it today you would earn a total of  4.00  from holding Norwegian Air Shuttle or generate 4.17% return on investment over 90 days.

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

Norwegian Air Shuttle  vs.  Cal Maine Foods

Norwegian Air Shuttle

Risk-Adjusted Performance

Insignificant

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 nearly fragile basic indicators, Norwegian Air may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cal Maine Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Maine Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cal-Maine Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Norwegian Air and Cal-Maine Foods

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

The idea behind Norwegian Air Shuttle and Cal Maine Foods 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.