Correlation Between Micron Technology and Norwegian Cruise

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

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

Diversification Opportunities for Micron Technology and Norwegian Cruise

0.27

Correlation Coefficient

Micron Technology  Norwegian Cruise

Modest diversification

The 3 months correlation between Micron and Norwegian is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology 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 Micron Technology 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 Micron Technology 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 Micron Technology i.e., Micron Technology and Norwegian Cruise go up and down completely randomly.

Pair Corralation between Micron Technology and Norwegian Cruise

Assuming the 90 days trading horizon Micron Technology is expected to generate 1.04 times more return on investment than Norwegian Cruise. However, Micron Technology is 1.04 times more volatile than Norwegian Cruise Line. It trades about 0.02 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about -0.09 per unit of risk. If you would invest  9,110  in Micron Technology on December 26, 2024 and sell it today you would lose (99.00) from holding Micron Technology or give up 1.09% of portfolio value over 90 days.

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

Micron Technology  vs.  Norwegian Cruise Line

Micron Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Micron Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Micron Technology and Norwegian Cruise

The main advantage of trading using opposite Micron Technology and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology 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 Micron Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.