Correlation Between Norwegian Air and Paccar

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

Diversification Opportunities for Norwegian Air and Paccar

-0.44

Correlation Coefficient

Norwegian Air  Paccar

Very good diversification

The 3 months correlation between Norwegian and Paccar is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Paccar Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paccar Inc 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 Paccar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paccar Inc has no effect on the direction of Norwegian Air i.e., Norwegian Air and Paccar go up and down completely randomly.

Pair Corralation between Norwegian Air and Paccar

Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to under-perform the Paccar. In addition to that, Norwegian Air is 1.65 times more volatile than Paccar Inc. It trades about -0.03 of its total potential returns per unit of risk. Paccar Inc is currently generating about 0.09 per unit of volatility. If you would invest  9,515  in Paccar Inc on September 25, 2024 and sell it today you would earn a total of  962.00  from holding Paccar Inc or generate 10.11% return on investment over 90 days.

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

Norwegian Air Shuttle  vs.  Paccar Inc

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Paccar Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paccar Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Paccar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Norwegian Air and Paccar

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

The idea behind Norwegian Air Shuttle and Paccar Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.