Correlation Between Techstep ASA and Norwegian Air

Can any of the company-specific risk be diversified away by investing in both Techstep ASA and Norwegian Air 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 Techstep ASA and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Techstep ASA and Norwegian Air Shuttle, you can compare the effects of market volatilities on Techstep ASA and Norwegian Air 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 Techstep ASA with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Techstep ASA and Norwegian Air.

Diversification Opportunities for Techstep ASA and Norwegian Air

-0.05

Correlation Coefficient

Techstep ASA  Norwegian Air

Good diversification

The 3 months correlation between Techstep and Norwegian is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Techstep ASA and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle and Techstep ASA 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 Techstep ASA are associated (or correlated) with Norwegian Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Air Shuttle has no effect on the direction of Techstep ASA i.e., Techstep ASA and Norwegian Air go up and down completely randomly.

Pair Corralation between Techstep ASA and Norwegian Air

Assuming the 90 days trading horizon Techstep ASA is expected to generate 1.13 times more return on investment than Norwegian Air. However, Techstep ASA is 1.13 times more volatile than Norwegian Air Shuttle. It trades about 0.1 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.07 per unit of risk. If you would invest  1,250  in Techstep ASA on October 12, 2024 and sell it today you would earn a total of  205.00  from holding Techstep ASA or generate 16.4% return on investment over 90 days.

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

Techstep ASA  vs.  Norwegian Air Shuttle

Techstep ASA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Techstep ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Techstep ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Norwegian Air Shuttle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norwegian Air Shuttle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Techstep ASA and Norwegian Air

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

The idea behind Techstep ASA and Norwegian Air Shuttle 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.