Correlation Between Norwegian Cruise and Microsoft Corp

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

Diversification Opportunities for Norwegian Cruise and Microsoft Corp

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between Norwegian and Microsoft is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Cruise Ord and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp 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 Ord are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of Norwegian Cruise i.e., Norwegian Cruise and Microsoft Corp go up and down completely randomly.

Pair Corralation between Norwegian Cruise and Microsoft Corp

Given the investment horizon of 90 days Norwegian Cruise Ord is expected to generate 2.79 times more return on investment than Microsoft Corp. However, Norwegian Cruise is 2.79 times more volatile than Microsoft Corp. It trades about 0.14 of its potential returns per unit of risk. Microsoft Corp is currently generating about 0.22 per unit of risk. If you would invest  1,143  in Norwegian Cruise Ord on May 18, 2022 and sell it today you would earn a total of  313.00  from holding Norwegian Cruise Ord or generate 27.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Norwegian Cruise Ord  vs.  Microsoft Corp

 Performance (%) 
       Timeline  
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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Norwegian Price Channel

Microsoft Corp 
Microsoft Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively sluggish technical and fundamental indicators, Microsoft Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microsoft Price Channel

Norwegian Cruise and Microsoft Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Norwegian Cruise and Microsoft Corp

The main advantage of trading using opposite Norwegian Cruise and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Cruise position performs unexpectedly, Microsoft Corp 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.
The idea behind Norwegian Cruise Ord and Microsoft Corp 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.
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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