Correlation Between Norwegian Cruise and Nordstrom
Can any of the company-specific risk be diversified away by investing in both Norwegian Cruise and Nordstrom 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 Nordstrom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norwegian Cruise Line and Nordstrom, you can compare the effects of market volatilities on Norwegian Cruise and Nordstrom 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 Nordstrom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Cruise and Nordstrom.
Diversification Opportunities for Norwegian Cruise and Nordstrom
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Norwegian and Nordstrom is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Cruise Line and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom 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 Line are associated (or correlated) with Nordstrom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordstrom has no effect on the direction of Norwegian Cruise i.e., Norwegian Cruise and Nordstrom go up and down completely randomly.
Pair Corralation between Norwegian Cruise and Nordstrom
Assuming the 90 days trading horizon Norwegian Cruise Line is expected to generate 1.59 times more return on investment than Nordstrom. However, Norwegian Cruise is 1.59 times more volatile than Nordstrom. It trades about 0.17 of its potential returns per unit of risk. Nordstrom is currently generating about 0.1 per unit of risk. 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 |
Norwegian Cruise Line vs. Nordstrom
Performance |
Timeline |
Norwegian Cruise Line |
Nordstrom |
Norwegian Cruise and Nordstrom Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Norwegian Cruise and Nordstrom
The main advantage of trading using opposite Norwegian Cruise and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Cruise position performs unexpectedly, Nordstrom 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 Nordstrom will offset losses from the drop in Nordstrom's long position.Norwegian Cruise vs. Booking Holdings | Norwegian Cruise vs. Royal Caribbean Cruises | Norwegian Cruise vs. Expedia Group | Norwegian Cruise vs. Carnival plc |
Nordstrom vs. Pet Center Comrcio | Nordstrom vs. Natura Co Holding | Nordstrom vs. Rede DOr So | Nordstrom vs. Lojas Quero Quero SA |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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