Correlation Between Waste Management and Norwegian Cruise
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Norwegian Cruise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Norwegian Cruise Line, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Norwegian Cruise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Norwegian Cruise.
Diversification Opportunities for Waste Management and Norwegian Cruise
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Waste and Norwegian is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management 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 Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Norwegian Cruise go up and down completely randomly.
Pair Corralation between Waste Management and Norwegian Cruise
Assuming the 90 days trading horizon Waste Management is expected to generate 1.34 times less return on investment than Norwegian Cruise. But when comparing it to its historical volatility, Waste Management is 2.06 times less risky than Norwegian Cruise. It trades about 0.41 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. Norwegian Cruise Line
Performance |
| Timeline |
| Waste Management |
| Norwegian Cruise Line |
Waste Management and Norwegian Cruise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Norwegian Cruise
The main advantage of trading using opposite Waste Management and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Warner Music Group | Waste Management vs. Marvell Technology | Waste Management vs. Charter Communications | Waste Management vs. Tyson Foods |
| 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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