Correlation Between Norwegian Cruise and Technos SA

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

Diversification Opportunities for Norwegian Cruise and Technos SA

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Norwegian and Technos is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Cruise Line and Technos SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technos SA 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 Technos SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technos SA has no effect on the direction of Norwegian Cruise i.e., Norwegian Cruise and Technos SA go up and down completely randomly.

Pair Corralation between Norwegian Cruise and Technos SA

Assuming the 90 days trading horizon Norwegian Cruise is expected to generate 1.09 times less return on investment than Technos SA. In addition to that, Norwegian Cruise is 1.11 times more volatile than Technos SA. It trades about 0.07 of its total potential returns per unit of risk. Technos SA is currently generating about 0.09 per unit of volatility. If you would invest  204.00  in Technos SA on September 12, 2024 and sell it today you would earn a total of  377.00  from holding Technos SA or generate 184.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.6%
ValuesDaily Returns

Norwegian Cruise Line  vs.  Technos SA

 Performance 
       Timeline  
Norwegian Cruise Line 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Cruise Line are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Norwegian Cruise sustained solid returns over the last few months and may actually be approaching a breakup point.
Technos SA 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Technos SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Technos SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Norwegian Cruise and Technos SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Norwegian Cruise and Technos SA

The main advantage of trading using opposite Norwegian Cruise and Technos SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Cruise position performs unexpectedly, Technos SA 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 Technos SA will offset losses from the drop in Technos SA's long position.
The idea behind Norwegian Cruise Line and Technos SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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