Correlation Between Norwegian Air and Archer

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

Diversification Opportunities for Norwegian Air and Archer

-0.16

Correlation Coefficient

Norwegian Air  Archer

Good diversification

The 3 months correlation between Norwegian and Archer is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Archer Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Limited 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 Archer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Limited has no effect on the direction of Norwegian Air i.e., Norwegian Air and Archer go up and down completely randomly.

Pair Corralation between Norwegian Air and Archer

Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to under-perform the Archer. In addition to that, Norwegian Air is 1.59 times more volatile than Archer Limited. It trades about -0.04 of its total potential returns per unit of risk. Archer Limited is currently generating about 0.02 per unit of volatility. If you would invest  2,288  in Archer Limited on September 25, 2024 and sell it today you would earn a total of  44.00  from holding Archer Limited or generate 1.92% 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.  Archer Limited

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.

Archer Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Archer is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Norwegian Air and Archer

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

The idea behind Norwegian Air Shuttle and Archer Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.