Correlation Between CPU SOFTWAREHOUSE and NORWEGIAN AIR

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

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

Diversification Opportunities for CPU SOFTWAREHOUSE and NORWEGIAN AIR

0.37

Correlation Coefficient

CPU SOFTWAREHOUSE  NORWEGIAN AIR

Weak diversification

The 3 months correlation between CPU and NORWEGIAN is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE i.e., CPU SOFTWAREHOUSE and NORWEGIAN AIR go up and down completely randomly.

Pair Corralation between CPU SOFTWAREHOUSE and NORWEGIAN AIR

Assuming the 90 days trading horizon CPU SOFTWAREHOUSE is expected to generate 1.47 times more return on investment than NORWEGIAN AIR. However, CPU SOFTWAREHOUSE is 1.47 times more volatile than NORWEGIAN AIR SHUT. It trades about -0.01 of its potential returns per unit of risk. NORWEGIAN AIR SHUT is currently generating about -0.02 per unit of risk. If you would invest  96.00  in CPU SOFTWAREHOUSE on September 20, 2024 and sell it today you would lose (7.00) from holding CPU SOFTWAREHOUSE or give up 7.29% of portfolio value over 90 days.

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

CPU SOFTWAREHOUSE  vs.  NORWEGIAN AIR SHUT

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPU SOFTWAREHOUSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CPU SOFTWAREHOUSE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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

Pair Trading with CPU SOFTWAREHOUSE and NORWEGIAN AIR

The main advantage of trading using opposite CPU SOFTWAREHOUSE and NORWEGIAN AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.