Correlation Between NORWEGIAN AIR and American Public

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Can any of the company-specific risk be diversified away by investing in both NORWEGIAN AIR and American Public 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 American Public into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORWEGIAN AIR SHUT and American Public Education, you can compare the effects of market volatilities on NORWEGIAN AIR and American Public 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 American Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORWEGIAN AIR and American Public.

Diversification Opportunities for NORWEGIAN AIR and American Public

-0.25
  Correlation Coefficient

Very good diversification

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

Pair Corralation between NORWEGIAN AIR and American Public

Assuming the 90 days trading horizon NORWEGIAN AIR SHUT is expected to under-perform the American Public. But the stock apears to be less risky and, when comparing its historical volatility, NORWEGIAN AIR SHUT is 1.16 times less risky than American Public. The stock trades about -0.03 of its potential returns per unit of risk. The American Public Education is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,210  in American Public Education on October 5, 2024 and sell it today you would earn a total of  850.00  from holding American Public Education or generate 70.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NORWEGIAN AIR SHUT  vs.  American Public Education

 Performance 
       Timeline  
NORWEGIAN AIR SHUT 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NORWEGIAN AIR SHUT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NORWEGIAN AIR is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
American Public Education 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Solid
Over the last 90 days American Public Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

NORWEGIAN AIR and American Public Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NORWEGIAN AIR and American Public

The main advantage of trading using opposite NORWEGIAN AIR and American Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORWEGIAN AIR position performs unexpectedly, American Public 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 American Public will offset losses from the drop in American Public's long position.
The idea behind NORWEGIAN AIR SHUT and American Public Education 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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