Correlation Between Basic Materials and Norwegian Cruise
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Norwegian Cruise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Norwegian Cruise Line, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Norwegian Cruise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Norwegian Cruise.
Diversification Opportunities for Basic Materials and Norwegian Cruise
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Basic and Norwegian is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials 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 Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Norwegian Cruise go up and down completely randomly.
Pair Corralation between Basic Materials and Norwegian Cruise
Assuming the 90 days trading horizon Basic Materials is expected to generate 25.04 times less return on investment than Norwegian Cruise. But when comparing it to its historical volatility, Basic Materials is 2.87 times less risky than Norwegian Cruise. It trades about 0.01 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,278 in Norwegian Cruise Line on September 3, 2024 and sell it today you would earn a total of 7,722 from holding Norwegian Cruise Line or generate 93.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
Basic Materials vs. Norwegian Cruise Line
Performance |
| Timeline |
Basic Materials and Norwegian Cruise Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Norwegian Cruise Line
Pair trading matchups for Norwegian Cruise
Pair Trading with Basic Materials and Norwegian Cruise
The main advantage of trading using opposite Basic Materials and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. G2D Investments | Basic Materials vs. Take Two Interactive Software | Basic Materials vs. Dell Technologies | Basic Materials vs. Brpr Corporate Offices |
| Norwegian Cruise vs. Brpr Corporate Offices | Norwegian Cruise vs. GP Investments | Norwegian Cruise vs. Metalrgica Riosulense SA | Norwegian Cruise vs. Metalurgica Gerdau SA |
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.
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