Correlation Between Norwegian Cruise and Travel Leisure

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

Diversification Opportunities for Norwegian Cruise and Travel Leisure

0.25

Correlation Coefficient

Norwegian Cruise  Travel Leisure

Modest diversification

The 3 months correlation between Norwegian and Travel is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Cruise Line and Travel Leisure Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travel Leisure 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 Travel Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travel Leisure has no effect on the direction of Norwegian Cruise i.e., Norwegian Cruise and Travel Leisure go up and down completely randomly.

Pair Corralation between Norwegian Cruise and Travel Leisure

Given the investment horizon of 90 days Norwegian Cruise Line is expected to under-perform the Travel Leisure. In addition to that, Norwegian Cruise is 1.77 times more volatile than Travel Leisure Co. It trades about -0.12 of its total potential returns per unit of risk. Travel Leisure Co is currently generating about 0.03 per unit of volatility. If you would invest  5,483  in Travel Leisure Co on December 1, 2024 and sell it today you would earn a total of  99.00  from holding Travel Leisure Co or generate 1.81% return on investment over 90 days.

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

Norwegian Cruise Line  vs.  Travel Leisure Co

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 conflicting performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Travel Leisure

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Travel Leisure Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Travel Leisure is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Norwegian Cruise and Travel Leisure

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

The idea behind Norwegian Cruise Line and Travel Leisure Co 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.