Correlation Between METISA Metalrgica and Norwegian Cruise

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

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

Diversification Opportunities for METISA Metalrgica and Norwegian Cruise

-0.49

Correlation Coefficient

METISA Metalrgica  Norwegian Cruise

Very good diversification

The 3 months correlation between METISA and Norwegian is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding METISA Metalrgica Timboense 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 METISA Metalrgica 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 METISA Metalrgica Timboense 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 METISA Metalrgica i.e., METISA Metalrgica and Norwegian Cruise go up and down completely randomly.

Pair Corralation between METISA Metalrgica and Norwegian Cruise

Assuming the 90 days trading horizon METISA Metalrgica is expected to generate 2.31 times less return on investment than Norwegian Cruise. In addition to that, METISA Metalrgica is 1.12 times more volatile than Norwegian Cruise Line. It trades about 0.06 of its total potential returns per unit of risk. Norwegian Cruise Line is currently generating about 0.17 per unit of volatility. If you would invest  12,826  in Norwegian Cruise Line on October 10, 2024 and sell it today you would earn a total of  2,813  from holding Norwegian Cruise Line or generate 21.93% return on investment over 90 days.

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

METISA Metalrgica Timboense  vs.  Norwegian Cruise Line

METISA Metalrgica

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in METISA Metalrgica Timboense are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, METISA Metalrgica may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Norwegian Cruise Line

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Cruise Line are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Norwegian Cruise sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with METISA Metalrgica and Norwegian Cruise

The main advantage of trading using opposite METISA Metalrgica and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METISA Metalrgica 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 METISA Metalrgica Timboense 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.