Correlation Between Norwegian Air and Linde Plc

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

Diversification Opportunities for Norwegian Air and Linde Plc

0.02

Correlation Coefficient

Norwegian Air  Linde Plc

Significant diversification

The 3 months correlation between Norwegian and Linde is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Linde plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc 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 Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc has no effect on the direction of Norwegian Air i.e., Norwegian Air and Linde Plc go up and down completely randomly.

Pair Corralation between Norwegian Air and Linde Plc

Assuming the 90 days horizon Norwegian Air Shuttle is expected to generate 3.0 times more return on investment than Linde Plc. However, Norwegian Air is 3.0 times more volatile than Linde plc. It trades about 0.2 of its potential returns per unit of risk. Linde plc is currently generating about 0.01 per unit of risk. If you would invest  106.00  in Norwegian Air Shuttle on April 21, 2025 and sell it today you would earn a total of  43.00  from holding Norwegian Air Shuttle or generate 40.57% 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.  Linde plc

Norwegian Air Shuttle

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Air Shuttle are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Norwegian Air reported solid returns over the last few months and may actually be approaching a breakup point.

Linde plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linde plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Linde Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Norwegian Air and Linde Plc

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

The idea behind Norwegian Air Shuttle and Linde plc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.