Correlation Between Norwegian Air and Vornado Realty

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

Diversification Opportunities for Norwegian Air and Vornado Realty

-0.48

Correlation Coefficient

Norwegian Air  Vornado Realty

Very good diversification

The 3 months correlation between Norwegian and Vornado is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Vornado Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vornado Realty Trust 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 Vornado Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vornado Realty Trust has no effect on the direction of Norwegian Air i.e., Norwegian Air and Vornado Realty go up and down completely randomly.

Pair Corralation between Norwegian Air and Vornado Realty

Assuming the 90 days horizon Norwegian Air Shuttle is expected to under-perform the Vornado Realty. In addition to that, Norwegian Air is 1.12 times more volatile than Vornado Realty Trust. It trades about -0.04 of its total potential returns per unit of risk. Vornado Realty Trust is currently generating about 0.1 per unit of volatility. If you would invest  3,406  in Vornado Realty Trust on September 26, 2024 and sell it today you would earn a total of  620.00  from holding Vornado Realty Trust or generate 18.2% return on investment over 90 days.

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

Norwegian Air Shuttle  vs.  Vornado Realty Trust

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Vornado Realty Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vornado Realty Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vornado Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norwegian Air and Vornado Realty

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

The idea behind Norwegian Air Shuttle and Vornado Realty Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.