Correlation Between Norwegian Air and Dassault Aviation

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

By analyzing existing cross correlation between Norwegian Air Shuttle and Dassault Aviation SA, you can compare the effects of market volatilities on Norwegian Air and Dassault Aviation 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 Dassault Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Dassault Aviation.

Diversification Opportunities for Norwegian Air and Dassault Aviation

-0.2

Correlation Coefficient

Norwegian Air  Dassault Aviation

Good diversification

The 3 months correlation between Norwegian and Dassault is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Dassault Aviation SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Aviation 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 Shuttle are associated (or correlated) with Dassault Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Aviation has no effect on the direction of Norwegian Air i.e., Norwegian Air and Dassault Aviation go up and down completely randomly.

Pair Corralation between Norwegian Air and Dassault Aviation

Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to under-perform the Dassault Aviation. In addition to that, Norwegian Air is 2.15 times more volatile than Dassault Aviation SA. It trades about -0.03 of its total potential returns per unit of risk. Dassault Aviation SA is currently generating about 0.03 per unit of volatility. If you would invest  18,952  in Dassault Aviation SA on September 21, 2024 and sell it today you would earn a total of  348.00  from holding Dassault Aviation SA or generate 1.84% return on investment over 90 days.

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

Norwegian Air Shuttle  vs.  Dassault Aviation SA

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. 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.

Dassault Aviation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Aviation SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dassault Aviation is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Norwegian Air and Dassault Aviation

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

The idea behind Norwegian Air Shuttle and Dassault Aviation SA 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.