Correlation Between Trip Group and Norwegian Cruise

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

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

Diversification Opportunities for Trip Group and Norwegian Cruise

0.63

Correlation Coefficient

Trip Group  Norwegian Cruise

Poor diversification

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

Pair Corralation between Trip Group and Norwegian Cruise

Given the investment horizon of 90 days Trip Group Ltd is expected to generate 1.09 times more return on investment than Norwegian Cruise. However, Trip Group is 1.09 times more volatile than Norwegian Cruise Line. It trades about -0.01 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about -0.16 per unit of risk. If you would invest  6,828  in Trip Group Ltd on December 29, 2024 and sell it today you would lose (310.00) from holding Trip Group Ltd or give up 4.54% of portfolio value over 90 days.

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

Trip Group Ltd  vs.  Norwegian Cruise Line

Trip Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trip Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Trip Group is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Trip Group and Norwegian Cruise

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

The idea behind Trip Group Ltd and Norwegian Cruise Line 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.