Correlation Between The9 and Norwegian Cruise

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Can any of the company-specific risk be diversified away by investing in both The9 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 The9 and Norwegian Cruise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The9 Ltd ADR and Norwegian Cruise Ord, you can compare the effects of market volatilities on The9 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 The9 with a short position of Norwegian Cruise. Check out your portfolio center. Please also check ongoing floating volatility patterns of The9 and Norwegian Cruise.

Diversification Opportunities for The9 and Norwegian Cruise

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between The9 and Norwegian is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding The9 Ltd ADR 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 The9 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 The9 Ltd ADR 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 The9 i.e., The9 and Norwegian Cruise go up and down completely randomly.

Pair Corralation between The9 and Norwegian Cruise

Given the investment horizon of 90 days The9 Ltd ADR is expected to under-perform the Norwegian Cruise. In addition to that, The9 is 1.46 times more volatile than Norwegian Cruise Ord. It trades about -0.14 of its total potential returns per unit of risk. Norwegian Cruise Ord is currently generating about 0.11 per unit of volatility. If you would invest  1,096  in Norwegian Cruise Ord on May 11, 2022 and sell it today you would earn a total of  99.00  from holding Norwegian Cruise Ord or generate 9.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

The9 Ltd ADR  vs.  Norwegian Cruise Ord

 Performance (%) 
       Timeline  
The9 Ltd ADR 
The9 Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The9 Ltd ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish basic indicators, The9 showed solid returns over the last few months and may actually be approaching a breakup point.

The9 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

The9 and Norwegian Cruise Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with The9 and Norwegian Cruise

The main advantage of trading using opposite The9 and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The9 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 The9 Ltd ADR 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.
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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