Correlation Between NORWEGIAN AIR and Tokio Marine

Can any of the company-specific risk be diversified away by investing in both NORWEGIAN AIR and Tokio Marine 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 Tokio Marine 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 Tokio Marine Holdings, you can compare the effects of market volatilities on NORWEGIAN AIR and Tokio Marine 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 Tokio Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORWEGIAN AIR and Tokio Marine.

Diversification Opportunities for NORWEGIAN AIR and Tokio Marine

0.38

Correlation Coefficient

NORWEGIAN AIR  Tokio Marine

Weak diversification

The 3 months correlation between NORWEGIAN and Tokio is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NORWEGIAN AIR SHUT and Tokio Marine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokio Marine Holdings 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 Tokio Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokio Marine Holdings has no effect on the direction of NORWEGIAN AIR i.e., NORWEGIAN AIR and Tokio Marine go up and down completely randomly.

Pair Corralation between NORWEGIAN AIR and Tokio Marine

Assuming the 90 days trading horizon NORWEGIAN AIR is expected to generate 1.1 times less return on investment than Tokio Marine. In addition to that, NORWEGIAN AIR is 1.25 times more volatile than Tokio Marine Holdings. It trades about 0.05 of its total potential returns per unit of risk. Tokio Marine Holdings is currently generating about 0.07 per unit of volatility. If you would invest  3,370  in Tokio Marine Holdings on December 22, 2024 and sell it today you would earn a total of  279.00  from holding Tokio Marine Holdings or generate 8.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

NORWEGIAN AIR SHUT  vs.  Tokio Marine Holdings

NORWEGIAN AIR SHUT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NORWEGIAN AIR SHUT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, NORWEGIAN AIR may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Tokio Marine Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tokio Marine Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tokio Marine may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NORWEGIAN AIR and Tokio Marine

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

The idea behind NORWEGIAN AIR SHUT and Tokio Marine Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.