Correlation Between Verizon Communications and Norwegian Cruise
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and Norwegian Cruise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Norwegian Cruise Line, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of Norwegian Cruise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Norwegian Cruise.
Diversification Opportunities for Verizon Communications and Norwegian Cruise
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Verizon and Norwegian is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Norwegian Cruise go up and down completely randomly.
Pair Corralation between Verizon Communications and Norwegian Cruise
Assuming the 90 days trading horizon Verizon Communications is expected to generate 1.13 times less return on investment than Norwegian Cruise. But when comparing it to its historical volatility, Verizon Communications is 2.2 times less risky than Norwegian Cruise. It trades about 0.52 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 14,588 in Norwegian Cruise Line on September 5, 2024 and sell it today you would earn a total of 2,090 from holding Norwegian Cruise Line or generate 14.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Norwegian Cruise Line
Performance |
| Timeline |
| Verizon Communications |
| Norwegian Cruise Line |
Verizon Communications and Norwegian Cruise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Norwegian Cruise
The main advantage of trading using opposite Verizon Communications and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. Telefnica Brasil SA | Verizon Communications vs. TIM SA | Verizon Communications vs. Oi SA |
| Norwegian Cruise vs. Take Two Interactive Software | Norwegian Cruise vs. Verizon Communications | Norwegian Cruise vs. Waste Management | Norwegian Cruise vs. Charter Communications |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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