Correlation Between Norwegian Air and Kid ASA

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

Diversification Opportunities for Norwegian Air and Kid ASA

0.38

Correlation Coefficient

Norwegian Air  Kid ASA

Weak diversification

The 3 months correlation between Norwegian and Kid is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Kid ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kid ASA 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 Kid ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kid ASA has no effect on the direction of Norwegian Air i.e., Norwegian Air and Kid ASA go up and down completely randomly.

Pair Corralation between Norwegian Air and Kid ASA

Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to under-perform the Kid ASA. In addition to that, Norwegian Air is 1.54 times more volatile than Kid ASA. It trades about -0.06 of its total potential returns per unit of risk. Kid ASA is currently generating about -0.07 per unit of volatility. If you would invest  14,855  in Kid ASA on September 30, 2024 and sell it today you would lose (1,455) from holding Kid ASA or give up 9.79% of portfolio value over 90 days.

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

Norwegian Air Shuttle  vs.  Kid ASA

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Kid ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kid ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Norwegian Air and Kid ASA

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

The idea behind Norwegian Air Shuttle and Kid ASA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.