Correlation Between Norwegian Air and Elmos Semiconductor

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

Diversification Opportunities for Norwegian Air and Elmos Semiconductor

0.45

Correlation Coefficient

Norwegian Air  Elmos Semiconductor

Very weak diversification

The 3 months correlation between Norwegian and Elmos is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Elmos Semiconductor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmos Semiconductor 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 Elmos Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmos Semiconductor has no effect on the direction of Norwegian Air i.e., Norwegian Air and Elmos Semiconductor go up and down completely randomly.

Pair Corralation between Norwegian Air and Elmos Semiconductor

Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 0.98 times more return on investment than Elmos Semiconductor. However, Norwegian Air Shuttle is 1.02 times less risky than Elmos Semiconductor. It trades about 0.05 of its potential returns per unit of risk. Elmos Semiconductor SE is currently generating about 0.0 per unit of risk. If you would invest  92.00  in Norwegian Air Shuttle on September 11, 2024 and sell it today you would earn a total of  7.00  from holding Norwegian Air Shuttle or generate 7.61% return on investment over 90 days.

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

Norwegian Air Shuttle  vs.  Elmos Semiconductor SE

Norwegian Air Shuttle

Risk-Adjusted Performance

3 of 100

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 January 2025.

Elmos Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elmos Semiconductor SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Elmos Semiconductor is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Norwegian Air and Elmos Semiconductor

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

The idea behind Norwegian Air Shuttle and Elmos Semiconductor SE 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..