Correlation Between Norwegian Cruise and Triunfo Participaes

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

Diversification Opportunities for Norwegian Cruise and Triunfo Participaes

0.63

Correlation Coefficient

Norwegian Cruise  Triunfo Participaes

Poor diversification

The 3 months correlation between Norwegian and Triunfo is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Cruise Line and Triunfo Participaes e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triunfo Participaes 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 Triunfo Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triunfo Participaes has no effect on the direction of Norwegian Cruise i.e., Norwegian Cruise and Triunfo Participaes go up and down completely randomly.

Pair Corralation between Norwegian Cruise and Triunfo Participaes

Assuming the 90 days trading horizon Norwegian Cruise Line is expected to generate 0.46 times more return on investment than Triunfo Participaes. However, Norwegian Cruise Line is 2.19 times less risky than Triunfo Participaes. It trades about -0.07 of its potential returns per unit of risk. Triunfo Participaes e is currently generating about -0.16 per unit of risk. If you would invest  16,000  in Norwegian Cruise Line on September 28, 2024 and sell it today you would lose (528.00) from holding Norwegian Cruise Line or give up 3.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Norwegian Cruise Line  vs.  Triunfo Participaes e

Norwegian Cruise Line

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Cruise Line are ranked lower than 14 (%) 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.

Triunfo Participaes

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Triunfo Participaes e are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Triunfo Participaes may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Norwegian Cruise and Triunfo Participaes

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

The idea behind Norwegian Cruise Line and Triunfo Participaes e 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.