Correlation Between Norwegian Cruise and METISA Metalrgica

Can any of the company-specific risk be diversified away by investing in both Norwegian Cruise and METISA Metalrgica 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 METISA Metalrgica 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 METISA Metalrgica Timboense, you can compare the effects of market volatilities on Norwegian Cruise and METISA Metalrgica 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 METISA Metalrgica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Cruise and METISA Metalrgica.

Diversification Opportunities for Norwegian Cruise and METISA Metalrgica

-0.33

Correlation Coefficient

Norwegian Cruise  METISA Metalrgica

Very good diversification

The 3 months correlation between Norwegian and METISA is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Cruise Line and METISA Metalrgica Timboense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METISA Metalrgica 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 METISA Metalrgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METISA Metalrgica has no effect on the direction of Norwegian Cruise i.e., Norwegian Cruise and METISA Metalrgica go up and down completely randomly.

Pair Corralation between Norwegian Cruise and METISA Metalrgica

Assuming the 90 days trading horizon Norwegian Cruise Line is expected to generate 1.22 times more return on investment than METISA Metalrgica. However, Norwegian Cruise is 1.22 times more volatile than METISA Metalrgica Timboense. It trades about 0.06 of its potential returns per unit of risk. METISA Metalrgica Timboense is currently generating about 0.02 per unit of risk. If you would invest  7,984  in Norwegian Cruise Line on October 11, 2024 and sell it today you would earn a total of  7,655  from holding Norwegian Cruise Line or generate 95.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Norwegian Cruise Line  vs.  METISA Metalrgica Timboense

Norwegian Cruise Line

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Cruise Line are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Norwegian Cruise sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Norwegian Cruise and METISA Metalrgica

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

The idea behind Norwegian Cruise Line and METISA Metalrgica Timboense 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.