Correlation Between Norwegian Air and CITIC Telecom

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

Diversification Opportunities for Norwegian Air and CITIC Telecom

0.01

Correlation Coefficient

Norwegian Air  CITIC Telecom

Significant diversification

The 3 months correlation between Norwegian and CITIC is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and CITIC Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Telecom Intern 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 CITIC Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Telecom Intern has no effect on the direction of Norwegian Air i.e., Norwegian Air and CITIC Telecom go up and down completely randomly.

Pair Corralation between Norwegian Air and CITIC Telecom

Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 0.9 times more return on investment than CITIC Telecom. However, Norwegian Air Shuttle is 1.11 times less risky than CITIC Telecom. It trades about 0.11 of its potential returns per unit of risk. CITIC Telecom International is currently generating about 0.04 per unit of risk. If you would invest  85.00  in Norwegian Air Shuttle on September 27, 2024 and sell it today you would earn a total of  10.00  from holding Norwegian Air Shuttle or generate 11.76% return on investment over 90 days.

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

Norwegian Air Shuttle  vs.  CITIC Telecom International

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 fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CITIC Telecom Intern

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Telecom International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITIC Telecom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Norwegian Air and CITIC Telecom

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

The idea behind Norwegian Air Shuttle and CITIC Telecom International 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.