Correlation Between SosTravel SPA and Norwegian Cruise

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

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

Diversification Opportunities for SosTravel SPA and Norwegian Cruise

0.0

Correlation Coefficient

SosTravel SPA  Norwegian Cruise

Pay attention - limited upside

The 3 months correlation between SosTravel and Norwegian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SosTravel SPA 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 SosTravel SPA 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 SosTravel SPA 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 SosTravel SPA i.e., SosTravel SPA and Norwegian Cruise go up and down completely randomly.

Pair Corralation between SosTravel SPA and Norwegian Cruise

If you would invest  2,108  in Norwegian Cruise Line on September 26, 2024 and sell it today you would earn a total of  534.00  from holding Norwegian Cruise Line or generate 25.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SosTravel SPA  vs.  Norwegian Cruise Line

SosTravel SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SosTravel SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SosTravel SPA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Norwegian Cruise Line

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Cruise Line are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting essential indicators, Norwegian Cruise demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SosTravel SPA and Norwegian Cruise

The main advantage of trading using opposite SosTravel SPA and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SosTravel SPA 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 SosTravel SPA 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.