Correlation Between Norwegian Air and FORWARD AIR

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

Diversification Opportunities for Norwegian Air and FORWARD AIR

0.03

Correlation Coefficient

Norwegian Air  FORWARD AIR

Significant diversification

The 3 months correlation between Norwegian and FORWARD is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and FORWARD AIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORWARD AIR P 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 FORWARD AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORWARD AIR P has no effect on the direction of Norwegian Air i.e., Norwegian Air and FORWARD AIR go up and down completely randomly.

Pair Corralation between Norwegian Air and FORWARD AIR

Assuming the 90 days horizon Norwegian Air Shuttle is expected to under-perform the FORWARD AIR. But the stock apears to be less risky and, when comparing its historical volatility, Norwegian Air Shuttle is 1.83 times less risky than FORWARD AIR. The stock trades about -0.15 of its potential returns per unit of risk. The FORWARD AIR P is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,180  in FORWARD AIR P on October 10, 2024 and sell it today you would earn a total of  20.00  from holding FORWARD AIR P or generate 0.63% return on investment over 90 days.

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

Norwegian Air Shuttle  vs.  FORWARD AIR P

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

FORWARD AIR P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Norwegian Air and FORWARD AIR

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

The idea behind Norwegian Air Shuttle and FORWARD AIR P 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.