Correlation Between PDG Realty and Norwegian Cruise

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

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

Diversification Opportunities for PDG Realty and Norwegian Cruise

-0.56

Correlation Coefficient

PDG Realty  Norwegian Cruise

Excellent diversification

The 3 months correlation between PDG and Norwegian is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding PDG Realty SA 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 PDG Realty 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 PDG Realty SA 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 PDG Realty i.e., PDG Realty and Norwegian Cruise go up and down completely randomly.

Pair Corralation between PDG Realty and Norwegian Cruise

Assuming the 90 days trading horizon PDG Realty SA is expected to under-perform the Norwegian Cruise. In addition to that, PDG Realty is 8.9 times more volatile than Norwegian Cruise Line. It trades about -0.13 of its total potential returns per unit of risk. Norwegian Cruise Line is currently generating about 0.17 per unit of volatility. If you would invest  11,613  in Norwegian Cruise Line on September 23, 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PDG Realty SA  vs.  Norwegian Cruise Line

PDG Realty SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PDG Realty SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm 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 PDG Realty and Norwegian Cruise

The main advantage of trading using opposite PDG Realty and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PDG Realty 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 PDG Realty SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.