Correlation Between Norwegian Air and Mitsubishi UFJ

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

Diversification Opportunities for Norwegian Air and Mitsubishi UFJ

-0.37

Correlation Coefficient

Norwegian Air  Mitsubishi UFJ

Very good diversification

The 3 months correlation between Norwegian and Mitsubishi is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Mitsubishi UFJ Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi UFJ Financial 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 Mitsubishi UFJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi UFJ Financial has no effect on the direction of Norwegian Air i.e., Norwegian Air and Mitsubishi UFJ go up and down completely randomly.

Pair Corralation between Norwegian Air and Mitsubishi UFJ

Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 1.89 times more return on investment than Mitsubishi UFJ. However, Norwegian Air is 1.89 times more volatile than Mitsubishi UFJ Financial. It trades about 0.08 of its potential returns per unit of risk. Mitsubishi UFJ Financial is currently generating about 0.11 per unit of risk. If you would invest  92.00  in Norwegian Air Shuttle on September 15, 2024 and sell it today you would earn a total of  4.00  from holding Norwegian Air Shuttle or generate 4.35% 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.  Mitsubishi UFJ Financial

Norwegian Air Shuttle

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Air Shuttle are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Mitsubishi UFJ Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Mitsubishi UFJ unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norwegian Air and Mitsubishi UFJ

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

The idea behind Norwegian Air Shuttle and Mitsubishi UFJ Financial 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.