Correlation Between Brinker International and Norwegian Cruise

Can any of the company-specific risk be diversified away by investing in both Brinker International 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 Brinker International and Norwegian Cruise into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brinker International and Norwegian Cruise Line, you can compare the effects of market volatilities on Brinker International 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 Brinker International with a short position of Norwegian Cruise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinker International and Norwegian Cruise.

Diversification Opportunities for Brinker International and Norwegian Cruise

0.43

Correlation Coefficient

Brinker International  Norwegian Cruise

Very weak diversification

The 3 months correlation between Brinker and Norwegian is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International 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 Brinker International 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 Brinker International 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 Brinker International i.e., Brinker International and Norwegian Cruise go up and down completely randomly.

Pair Corralation between Brinker International and Norwegian Cruise

Considering the 90-day investment horizon Brinker International is expected to generate 1.41 times more return on investment than Norwegian Cruise. However, Brinker International is 1.41 times more volatile than Norwegian Cruise Line. It trades about 0.06 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about -0.16 per unit of risk. If you would invest  13,210  in Brinker International on December 30, 2024 and sell it today you would earn a total of  1,549  from holding Brinker International or generate 11.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Brinker International  vs.  Norwegian Cruise Line

Brinker International

Risk-Adjusted Performance

Modest

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

Norwegian Cruise Line

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norwegian Cruise Line has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Brinker International and Norwegian Cruise

The main advantage of trading using opposite Brinker International and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinker International 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.

The idea behind Brinker International and Norwegian Cruise Line 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.

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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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.