Correlation Between General Electric and Norwegian Cruise

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Can any of the company-specific risk be diversified away by investing in both General Electric 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 General Electric and Norwegian Cruise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Electric and Norwegian Cruise Ord, you can compare the effects of market volatilities on General Electric 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 General Electric with a short position of Norwegian Cruise. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Electric and Norwegian Cruise.

Diversification Opportunities for General Electric and Norwegian Cruise

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between General and Norwegian is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Norwegian Cruise Ord in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Cruise Ord and General Electric 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 General Electric 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 Ord has no effect on the direction of General Electric i.e., General Electric and Norwegian Cruise go up and down completely randomly.

Pair Corralation between General Electric and Norwegian Cruise

Allowing for the 90-day total investment horizon General Electric is expected to generate 0.45 times more return on investment than Norwegian Cruise. However, General Electric is 2.2 times less risky than Norwegian Cruise. It trades about -0.1 of its potential returns per unit of risk. Norwegian Cruise Ord is currently generating about -0.06 per unit of risk. If you would invest  10,864  in General Electric on July 3, 2022 and sell it today you would lose (4,673)  from holding General Electric or give up 43.01% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

General Electric  vs.  Norwegian Cruise Ord

 Performance (%) 
       Timeline  
General Electric 
General Performance
0 of 100
Over the last 90 days General Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, General Electric is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

General Price Channel

Norwegian Cruise Ord 
Norwegian Performance
0 of 100
Over the last 90 days Norwegian Cruise Ord has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Norwegian Cruise is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Norwegian Price Channel

General Electric and Norwegian Cruise Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and Norwegian Cruise

The main advantage of trading using opposite General Electric and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric 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.
General Electric vs. Amazon Inc
The idea behind General Electric and Norwegian Cruise Ord 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.
Norwegian Cruise vs. Amazon Inc
Check out your portfolio center. 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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