Correlation Between NORWEGIAN AIR and Microsoft

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

Diversification Opportunities for NORWEGIAN AIR and Microsoft

0.04

Correlation Coefficient

NORWEGIAN AIR  Microsoft

Significant diversification

The 3 months correlation between NORWEGIAN and Microsoft is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NORWEGIAN AIR SHUT and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of NORWEGIAN AIR i.e., NORWEGIAN AIR and Microsoft go up and down completely randomly.

Pair Corralation between NORWEGIAN AIR and Microsoft

Assuming the 90 days trading horizon NORWEGIAN AIR is expected to generate 3.01 times less return on investment than Microsoft. In addition to that, NORWEGIAN AIR is 2.2 times more volatile than Microsoft. It trades about 0.01 of its total potential returns per unit of risk. Microsoft is currently generating about 0.09 per unit of volatility. If you would invest  23,652  in Microsoft on October 24, 2024 and sell it today you would earn a total of  17,413  from holding Microsoft or generate 73.62% return on investment over 90 days.

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

NORWEGIAN AIR SHUT  vs.  Microsoft

NORWEGIAN AIR SHUT

Risk-Adjusted Performance

0 of 100

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NORWEGIAN AIR and Microsoft

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

The idea behind NORWEGIAN AIR SHUT and Microsoft 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.