Correlation Between NORWEGIAN AIR and Yanzhou Coal

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

By analyzing existing cross correlation between NORWEGIAN AIR SHUT and Yanzhou Coal Mining, you can compare the effects of market volatilities on NORWEGIAN AIR and Yanzhou Coal 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 Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORWEGIAN AIR and Yanzhou Coal.

Diversification Opportunities for NORWEGIAN AIR and Yanzhou Coal

-0.63

Correlation Coefficient

NORWEGIAN AIR  Yanzhou Coal

Excellent diversification

The 3 months correlation between NORWEGIAN and Yanzhou is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding NORWEGIAN AIR SHUT and Yanzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yanzhou Coal Mining 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 SHUT are associated (or correlated) with Yanzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yanzhou Coal Mining has no effect on the direction of NORWEGIAN AIR i.e., NORWEGIAN AIR and Yanzhou Coal go up and down completely randomly.

Pair Corralation between NORWEGIAN AIR and Yanzhou Coal

Assuming the 90 days trading horizon NORWEGIAN AIR SHUT is expected to under-perform the Yanzhou Coal. But the stock apears to be less risky and, when comparing its historical volatility, NORWEGIAN AIR SHUT is 1.35 times less risky than Yanzhou Coal. The stock trades about -0.03 of its potential returns per unit of risk. The Yanzhou Coal Mining is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  85.00  in Yanzhou Coal Mining on September 22, 2024 and sell it today you would earn a total of  24.00  from holding Yanzhou Coal Mining or generate 28.24% return on investment over 90 days.

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

NORWEGIAN AIR SHUT  vs.  Yanzhou Coal Mining

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.

Yanzhou Coal Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yanzhou Coal Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Yanzhou Coal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NORWEGIAN AIR and Yanzhou Coal

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

The idea behind NORWEGIAN AIR SHUT and Yanzhou Coal Mining 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.