Correlation Between NORWEGIAN AIR and Schlumberger

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

Diversification Opportunities for NORWEGIAN AIR and Schlumberger

0.24

Correlation Coefficient

NORWEGIAN AIR  Schlumberger

Modest diversification

The 3 months correlation between NORWEGIAN and Schlumberger is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NORWEGIAN AIR SHUT and Schlumberger Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger Limited 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 Schlumberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schlumberger Limited has no effect on the direction of NORWEGIAN AIR i.e., NORWEGIAN AIR and Schlumberger go up and down completely randomly.

Pair Corralation between NORWEGIAN AIR and Schlumberger

Assuming the 90 days trading horizon NORWEGIAN AIR SHUT is expected to generate 1.48 times more return on investment than Schlumberger. However, NORWEGIAN AIR is 1.48 times more volatile than Schlumberger Limited. It trades about 0.01 of its potential returns per unit of risk. Schlumberger Limited is currently generating about 0.0 per unit of risk. If you would invest  91.00  in NORWEGIAN AIR SHUT on October 23, 2024 and sell it today you would lose (1.00) from holding NORWEGIAN AIR SHUT or give up 1.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

NORWEGIAN AIR SHUT  vs.  Schlumberger Limited

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

Schlumberger Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Schlumberger Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Schlumberger reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NORWEGIAN AIR and Schlumberger

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

The idea behind NORWEGIAN AIR SHUT and Schlumberger Limited 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.