Correlation Between Air New and Norse Atlantic

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

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

Diversification Opportunities for Air New and Norse Atlantic

-0.11

Correlation Coefficient

Air New  Norse Atlantic

Good diversification

The 3 months correlation between Air and Norse is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Norse Atlantic ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norse Atlantic ASA and Air New 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 Air New Zealand are associated (or correlated) with Norse Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norse Atlantic ASA has no effect on the direction of Air New i.e., Air New and Norse Atlantic go up and down completely randomly.

Pair Corralation between Air New and Norse Atlantic

Assuming the 90 days horizon Air New Zealand is expected to under-perform the Norse Atlantic. But the pink sheet apears to be less risky and, when comparing its historical volatility, Air New Zealand is 2.6 times less risky than Norse Atlantic. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Norse Atlantic ASA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Norse Atlantic ASA on September 3, 2024 and sell it today you would earn a total of  13.00  from holding Norse Atlantic ASA or generate 61.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Air New Zealand  vs.  Norse Atlantic ASA

Air New Zealand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air New Zealand 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Norse Atlantic ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Norse Atlantic ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Norse Atlantic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air New and Norse Atlantic

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

The idea behind Air New Zealand and Norse Atlantic 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.