Correlation Between Norwegian Cruise and Kellanova

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

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

Diversification Opportunities for Norwegian Cruise and Kellanova

0.83

Correlation Coefficient

Norwegian Cruise  Kellanova

Very poor diversification

The 3 months correlation between Norwegian and Kellanova is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Cruise Line and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova and Norwegian Cruise 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 Norwegian Cruise Line are associated (or correlated) with Kellanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellanova has no effect on the direction of Norwegian Cruise i.e., Norwegian Cruise and Kellanova go up and down completely randomly.

Pair Corralation between Norwegian Cruise and Kellanova

Assuming the 90 days trading horizon Norwegian Cruise Line is expected to generate 2.14 times more return on investment than Kellanova. However, Norwegian Cruise is 2.14 times more volatile than Kellanova. It trades about 0.22 of its potential returns per unit of risk. Kellanova is currently generating about 0.16 per unit of risk. If you would invest  11,176  in Norwegian Cruise Line on October 8, 2024 and sell it today you would earn a total of  4,463  from holding Norwegian Cruise Line or generate 39.93% return on investment over 90 days.

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

Norwegian Cruise Line  vs.  Kellanova

Norwegian Cruise Line

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Cruise Line are ranked lower than 16 (%) 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.

Kellanova

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kellanova sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norwegian Cruise and Kellanova

The main advantage of trading using opposite Norwegian Cruise and Kellanova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Cruise position performs unexpectedly, Kellanova 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 Kellanova will offset losses from the drop in Kellanova's long position.

The idea behind Norwegian Cruise Line and Kellanova 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.