Correlation Between X Financial and Norwegian Cruise

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

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

Diversification Opportunities for X Financial and Norwegian Cruise

0.31

Correlation Coefficient

X Financial  Norwegian Cruise

Weak diversification

The 3 months correlation between XYF and Norwegian is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class 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 X Financial 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 X Financial Class 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 X Financial i.e., X Financial and Norwegian Cruise go up and down completely randomly.

Pair Corralation between X Financial and Norwegian Cruise

Considering the 90-day investment horizon X Financial Class is expected to generate 2.41 times more return on investment than Norwegian Cruise. However, X Financial is 2.41 times more volatile than Norwegian Cruise Line. It trades about 0.22 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about -0.11 per unit of risk. If you would invest  708.00  in X Financial Class on October 5, 2024 and sell it today you would earn a total of  133.00  from holding X Financial Class or generate 18.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

X Financial Class  vs.  Norwegian Cruise Line

X Financial Class

Risk-Adjusted Performance

2 of 100

Modest

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

Norwegian Cruise Line

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Cruise Line are ranked lower than 18 (%) 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.

Pair Trading with X Financial and Norwegian Cruise

The main advantage of trading using opposite X Financial and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X Financial 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 X Financial Class 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .