Correlation Between Algonquin Power and NORWEGIAN AIR

Can any of the company-specific risk be diversified away by investing in both Algonquin Power 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 Algonquin Power and NORWEGIAN AIR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Algonquin Power Utilities and NORWEGIAN AIR SHUT, you can compare the effects of market volatilities on Algonquin Power 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 Algonquin Power with a short position of NORWEGIAN AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and NORWEGIAN AIR.

Diversification Opportunities for Algonquin Power and NORWEGIAN AIR

0.65

Correlation Coefficient

Algonquin Power  NORWEGIAN AIR

Poor diversification

The 3 months correlation between Algonquin and NORWEGIAN is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and NORWEGIAN AIR SHUT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORWEGIAN AIR SHUT and Algonquin Power 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 Algonquin Power Utilities 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 SHUT has no effect on the direction of Algonquin Power i.e., Algonquin Power and NORWEGIAN AIR go up and down completely randomly.

Pair Corralation between Algonquin Power and NORWEGIAN AIR

Assuming the 90 days horizon Algonquin Power Utilities is expected to under-perform the NORWEGIAN AIR. But the stock apears to be less risky and, when comparing its historical volatility, Algonquin Power Utilities is 1.6 times less risky than NORWEGIAN AIR. The stock trades about -0.01 of its potential returns per unit of risk. The NORWEGIAN AIR SHUT is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  83.00  in NORWEGIAN AIR SHUT on September 3, 2024 and sell it today you would earn a total of  12.00  from holding NORWEGIAN AIR SHUT or generate 14.46% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  NORWEGIAN AIR SHUT

Algonquin Power Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algonquin Power Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Algonquin Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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

Pair Trading with Algonquin Power and NORWEGIAN AIR

The main advantage of trading using opposite Algonquin Power and NORWEGIAN AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power 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 Algonquin Power Utilities and NORWEGIAN AIR SHUT 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.