Correlation Between CVC Brasil and Norwegian Cruise

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

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

Diversification Opportunities for CVC Brasil and Norwegian Cruise

0.54

Correlation Coefficient

CVC Brasil  Norwegian Cruise

Very weak diversification

The 3 months correlation between CVC and Norwegian is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CVC Brasil Operadora 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 CVC Brasil 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 CVC Brasil Operadora 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 CVC Brasil i.e., CVC Brasil and Norwegian Cruise go up and down completely randomly.

Pair Corralation between CVC Brasil and Norwegian Cruise

Assuming the 90 days trading horizon CVC Brasil Operadora is expected to under-perform the Norwegian Cruise. In addition to that, CVC Brasil is 3.14 times more volatile than Norwegian Cruise Line. It trades about -0.26 of its total potential returns per unit of risk. Norwegian Cruise Line is currently generating about -0.04 per unit of volatility. If you would invest  15,808  in Norwegian Cruise Line on September 23, 2024 and sell it today you would lose (336.00) from holding Norwegian Cruise Line or give up 2.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CVC Brasil Operadora  vs.  Norwegian Cruise Line

CVC Brasil Operadora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVC Brasil Operadora has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CVC Brasil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Norwegian Cruise Line

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Cruise Line are ranked lower than 13 (%) 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 CVC Brasil and Norwegian Cruise

The main advantage of trading using opposite CVC Brasil and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVC Brasil 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 CVC Brasil Operadora 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.