Correlation Between Palantir Technologies and Norwegian Cruise

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

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

Diversification Opportunities for Palantir Technologies and Norwegian Cruise

0.89

Correlation Coefficient

Palantir Technologies  Norwegian Cruise

Very poor diversification

The 3 months correlation between Palantir and Norwegian is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies i.e., Palantir Technologies and Norwegian Cruise go up and down completely randomly.

Pair Corralation between Palantir Technologies and Norwegian Cruise

Assuming the 90 days trading horizon Palantir Technologies is expected to generate 1.63 times more return on investment than Norwegian Cruise. However, Palantir Technologies is 1.63 times more volatile than Norwegian Cruise Line. It trades about 0.38 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about -0.04 per unit of risk. If you would invest  12,450  in Palantir Technologies on September 24, 2024 and sell it today you would earn a total of  3,719  from holding Palantir Technologies or generate 29.87% return on investment over 90 days.

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

Palantir Technologies  vs.  Norwegian Cruise Line

Palantir Technologies

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Palantir Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Palantir Technologies and Norwegian Cruise

The main advantage of trading using opposite Palantir Technologies and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palantir Technologies 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 Palantir Technologies 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.