Correlation Between NORWEGIAN AIR and United Utilities

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

Diversification Opportunities for NORWEGIAN AIR and United Utilities

0.45

Correlation Coefficient

NORWEGIAN AIR  United Utilities

Very weak diversification

The 3 months correlation between NORWEGIAN and United is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding NORWEGIAN AIR SHUT and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of NORWEGIAN AIR i.e., NORWEGIAN AIR and United Utilities go up and down completely randomly.

Pair Corralation between NORWEGIAN AIR and United Utilities

Assuming the 90 days trading horizon NORWEGIAN AIR SHUT is expected to generate 1.79 times more return on investment than United Utilities. However, NORWEGIAN AIR is 1.79 times more volatile than United Utilities Group. It trades about 0.01 of its potential returns per unit of risk. United Utilities Group is currently generating about 0.02 per unit of risk. If you would invest  95.00  in NORWEGIAN AIR SHUT on December 5, 2024 and sell it today you would lose (2.00) from holding NORWEGIAN AIR SHUT or give up 2.11% of portfolio value over 90 days.

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

NORWEGIAN AIR SHUT  vs.  United Utilities Group

NORWEGIAN AIR SHUT

Risk-Adjusted Performance

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.

United Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Utilities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with NORWEGIAN AIR and United Utilities

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

The idea behind NORWEGIAN AIR SHUT and United Utilities Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.