Correlation Between Norwegian Cruise and Airbnb

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

Diversification Opportunities for Norwegian Cruise and Airbnb

-0.03

Correlation Coefficient

Norwegian Cruise  Airbnb

Good diversification

The 3 months correlation between Norwegian and Airbnb is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Cruise Line and Airbnb Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbnb Inc 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 Airbnb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbnb Inc has no effect on the direction of Norwegian Cruise i.e., Norwegian Cruise and Airbnb go up and down completely randomly.

Pair Corralation between Norwegian Cruise and Airbnb

Given the investment horizon of 90 days Norwegian Cruise Line is expected to under-perform the Airbnb. But the stock apears to be less risky and, when comparing its historical volatility, Norwegian Cruise Line is 1.02 times less risky than Airbnb. The stock trades about -0.04 of its potential returns per unit of risk. The Airbnb Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  13,611  in Airbnb Inc on November 28, 2024 and sell it today you would earn a total of  544.00  from holding Airbnb Inc or generate 4.0% return on investment over 90 days.

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

Norwegian Cruise Line  vs.  Airbnb Inc

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 latest conflicting performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Airbnb Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Airbnb Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Airbnb may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Norwegian Cruise and Airbnb

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

The idea behind Norwegian Cruise Line and Airbnb Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..