Correlation Between Nordstrom and Norwegian Cruise
Can any of the company-specific risk be diversified away by investing in both Nordstrom 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 Nordstrom and Norwegian Cruise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nordstrom and Norwegian Cruise Line, you can compare the effects of market volatilities on Nordstrom 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 Nordstrom with a short position of Norwegian Cruise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordstrom and Norwegian Cruise.
Diversification Opportunities for Nordstrom and Norwegian Cruise
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nordstrom and Norwegian is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nordstrom 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 Nordstrom 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 Nordstrom 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 Nordstrom i.e., Nordstrom and Norwegian Cruise go up and down completely randomly.
Pair Corralation between Nordstrom and Norwegian Cruise
Assuming the 90 days trading horizon Nordstrom is expected to generate 2.67 times less return on investment than Norwegian Cruise. But when comparing it to its historical volatility, Nordstrom is 1.59 times less risky than Norwegian Cruise. It trades about 0.1 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 11,613 in Norwegian Cruise Line on September 24, 2024 and sell it today you would earn a total of 3,859 from holding Norwegian Cruise Line or generate 33.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Nordstrom vs. Norwegian Cruise Line
Performance |
Timeline |
Nordstrom |
Norwegian Cruise Line |
Nordstrom and Norwegian Cruise Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nordstrom and Norwegian Cruise
The main advantage of trading using opposite Nordstrom and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordstrom 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.Nordstrom vs. Pet Center Comrcio | Nordstrom vs. Natura Co Holding | Nordstrom vs. Rede DOr So | Nordstrom vs. Lojas Quero Quero SA |
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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 the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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