Correlation Between Nel ASA and Norwegian Air

Can any of the company-specific risk be diversified away by investing in both Nel ASA 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 Nel ASA and Norwegian Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nel ASA and Norwegian Air Shuttle, you can compare the effects of market volatilities on Nel ASA 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 Nel ASA with a short position of Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nel ASA and Norwegian Air.

Diversification Opportunities for Nel ASA and Norwegian Air

0.31

Correlation Coefficient

Nel ASA  Norwegian Air

Weak diversification

The 3 months correlation between Nel and Norwegian is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Nel ASA and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle and Nel ASA 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 Nel ASA 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 Shuttle has no effect on the direction of Nel ASA i.e., Nel ASA and Norwegian Air go up and down completely randomly.

Pair Corralation between Nel ASA and Norwegian Air

Assuming the 90 days trading horizon Nel ASA is expected to under-perform the Norwegian Air. In addition to that, Nel ASA is 1.16 times more volatile than Norwegian Air Shuttle. It trades about -0.21 of its total potential returns per unit of risk. Norwegian Air Shuttle is currently generating about 0.02 per unit of volatility. If you would invest  1,130  in Norwegian Air Shuttle on September 13, 2024 and sell it today you would earn a total of  2.00  from holding Norwegian Air Shuttle or generate 0.18% return on investment over 90 days.

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

Nel ASA  vs.  Norwegian Air Shuttle

Nel ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nel ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential 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.

Norwegian Air Shuttle

Risk-Adjusted Performance

1 of 100

Insignificant

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

Pair Trading with Nel ASA and Norwegian Air

The main advantage of trading using opposite Nel ASA and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nel ASA 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 Nel ASA and Norwegian Air Shuttle 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.