Correlation Between Astar and Norwegian Cruise
Can any of the company-specific risk be diversified away by investing in both Astar and Norwegian Cruise 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 Astar and Norwegian Cruise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Astar and Norwegian Cruise Line, you can compare the effects of market volatilities on Astar and Norwegian Cruise 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 Astar with a short position of Norwegian Cruise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and Norwegian Cruise.
Diversification Opportunities for Astar and Norwegian Cruise
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Astar and Norwegian is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Norwegian Cruise Line in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Cruise Line and Astar 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 Astar are associated (or correlated) with Norwegian Cruise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Cruise Line has no effect on the direction of Astar i.e., Astar and Norwegian Cruise go up and down completely randomly.
Pair Corralation between Astar and Norwegian Cruise
Assuming the 90 days trading horizon Astar is expected to generate 2.68 times more return on investment than Norwegian Cruise. However, Astar is 2.68 times more volatile than Norwegian Cruise Line. It trades about 0.03 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about 0.05 per unit of risk. If you would invest 5.89 in Astar on October 20, 2024 and sell it today you would earn a total of 0.47 from holding Astar or generate 7.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 60.2% |
| Values | Daily Returns |
Astar vs. Norwegian Cruise Line
Performance |
| Timeline |
| Astar |
| Norwegian Cruise Line |
Astar and Norwegian Cruise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Astar and Norwegian Cruise
The main advantage of trading using opposite Astar and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astar position performs unexpectedly, Norwegian Cruise 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 Cruise will offset losses from the drop in Norwegian Cruise's long position.The idea behind Astar and Norwegian Cruise Line 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.| Norwegian Cruise vs. Carnival | Norwegian Cruise vs. Airbnb Inc | Norwegian Cruise vs. Expedia Group | Norwegian Cruise vs. Booking Holdings |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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