Correlation Between Norwegian Air and HF SINCLAIR

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

Diversification Opportunities for Norwegian Air and HF SINCLAIR

-0.39

Correlation Coefficient

Norwegian Air  HF SINCLAIR

Very good diversification

The 3 months correlation between Norwegian and HL80 is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and HF SINCLAIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HF SINCLAIR 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 HF SINCLAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HF SINCLAIR P has no effect on the direction of Norwegian Air i.e., Norwegian Air and HF SINCLAIR go up and down completely randomly.

Pair Corralation between Norwegian Air and HF SINCLAIR

Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 1.22 times more return on investment than HF SINCLAIR. However, Norwegian Air is 1.22 times more volatile than HF SINCLAIR P. It trades about 0.08 of its potential returns per unit of risk. HF SINCLAIR P is currently generating about -0.02 per unit of risk. If you would invest  92.00  in Norwegian Air Shuttle on December 30, 2024 and sell it today you would earn a total of  13.00  from holding Norwegian Air Shuttle or generate 14.13% return on investment over 90 days.

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

Norwegian Air Shuttle  vs.  HF SINCLAIR P

Norwegian Air Shuttle

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Air Shuttle are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Norwegian Air reported solid returns over the last few months and may actually be approaching a breakup point.

HF SINCLAIR P

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Norwegian Air and HF SINCLAIR

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

The idea behind Norwegian Air Shuttle and HF SINCLAIR 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.