Correlation Between International Business and Norwegian Cruise

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

Diversification Opportunities for International Business and Norwegian Cruise

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between International and Norwegian is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine 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 International Business 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 International Business Machines 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 International Business i.e., International Business and Norwegian Cruise go up and down completely randomly.

Pair Corralation between International Business and Norwegian Cruise

Considering the 90-day investment horizon International Business Machines is expected to under-perform the Norwegian Cruise. But the stock apears to be less risky and, when comparing its historical volatility, International Business Machines is 4.24 times less risky than Norwegian Cruise. The stock trades about -0.02 of its potential returns per unit of risk. The Norwegian Cruise Ord is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,332  in Norwegian Cruise Ord on July 6, 2022 and sell it today you would lose (3.00)  from holding Norwegian Cruise Ord or give up 0.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

International Business Machine  vs.  Norwegian Cruise Ord

 Performance (%) 
       Timeline  
International Business 
International Performance
0 of 100
Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental drivers remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

International Price Channel

Norwegian Cruise Ord 
Norwegian Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Cruise Ord are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, Norwegian Cruise reported solid returns over the last few months and may actually be approaching a breakup point.

Norwegian Price Channel

International Business and Norwegian Cruise Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and Norwegian Cruise

The main advantage of trading using opposite International Business and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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.
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The idea behind International Business Machines 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.
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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