Correlation Between Norwegian Air and GREENLIGHT CAPRE

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

Diversification Opportunities for Norwegian Air and GREENLIGHT CAPRE

0.25

Correlation Coefficient

Norwegian Air  GREENLIGHT CAPRE

Modest diversification

The 3 months correlation between Norwegian and GREENLIGHT is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and GREENLIGHT CAPRE A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREENLIGHT CAPRE A 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 GREENLIGHT CAPRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREENLIGHT CAPRE A has no effect on the direction of Norwegian Air i.e., Norwegian Air and GREENLIGHT CAPRE go up and down completely randomly.

Pair Corralation between Norwegian Air and GREENLIGHT CAPRE

Assuming the 90 days horizon Norwegian Air is expected to generate 2.5 times less return on investment than GREENLIGHT CAPRE. In addition to that, Norwegian Air is 1.8 times more volatile than GREENLIGHT CAPRE A. It trades about 0.01 of its total potential returns per unit of risk. GREENLIGHT CAPRE A is currently generating about 0.06 per unit of volatility. If you would invest  875.00  in GREENLIGHT CAPRE A on October 24, 2024 and sell it today you would earn a total of  485.00  from holding GREENLIGHT CAPRE A or generate 55.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Norwegian Air Shuttle  vs.  GREENLIGHT CAPRE A

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.

GREENLIGHT CAPRE A

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GREENLIGHT CAPRE A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GREENLIGHT CAPRE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Norwegian Air and GREENLIGHT CAPRE

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

The idea behind Norwegian Air Shuttle and GREENLIGHT CAPRE A 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.