Correlation Between Norwegian Cruise and S1YM34
Can any of the company-specific risk be diversified away by investing in both Norwegian Cruise and S1YM34 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 Cruise and S1YM34 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norwegian Cruise Line and S1YM34, you can compare the effects of market volatilities on Norwegian Cruise and S1YM34 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 Cruise with a short position of S1YM34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Cruise and S1YM34.
Diversification Opportunities for Norwegian Cruise and S1YM34
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Norwegian and S1YM34 is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Cruise Line and S1YM34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S1YM34 and Norwegian Cruise 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 Cruise Line are associated (or correlated) with S1YM34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S1YM34 has no effect on the direction of Norwegian Cruise i.e., Norwegian Cruise and S1YM34 go up and down completely randomly.
Pair Corralation between Norwegian Cruise and S1YM34
Assuming the 90 days trading horizon Norwegian Cruise Line is expected to generate 1.64 times more return on investment than S1YM34. However, Norwegian Cruise is 1.64 times more volatile than S1YM34. It trades about 0.07 of its potential returns per unit of risk. S1YM34 is currently generating about 0.05 per unit of risk. If you would invest 6,895 in Norwegian Cruise Line on September 26, 2024 and sell it today you would earn a total of 8,577 from holding Norwegian Cruise Line or generate 124.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Norwegian Cruise Line vs. S1YM34
Performance |
| Timeline |
| Norwegian Cruise Line |
| S1YM34 |
Norwegian Cruise and S1YM34 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Cruise and S1YM34
The main advantage of trading using opposite Norwegian Cruise and S1YM34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Cruise position performs unexpectedly, S1YM34 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 S1YM34 will offset losses from the drop in S1YM34's long position.| Norwegian Cruise vs. Booking Holdings | Norwegian Cruise vs. Royal Caribbean Cruises | Norwegian Cruise vs. Expedia Group | Norwegian Cruise vs. Carnival plc |
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.
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