Correlation Between AirbnbInc and Norwegian Cruise

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

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

Diversification Opportunities for AirbnbInc and Norwegian Cruise

0.77

Correlation Coefficient

AirbnbInc  Norwegian Cruise

Poor diversification

The 3 months correlation between AirbnbInc and Norwegian is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding AirbnbInc 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 AirbnbInc 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 AirbnbInc 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 AirbnbInc i.e., AirbnbInc and Norwegian Cruise go up and down completely randomly.

Pair Corralation between AirbnbInc and Norwegian Cruise

Given the investment horizon of 90 days AirbnbInc is expected to generate 0.74 times more return on investment than Norwegian Cruise. However, AirbnbInc is 1.35 times less risky than Norwegian Cruise. It trades about 0.04 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about 0.02 per unit of risk. If you would invest  11,444  in AirbnbInc on February 3, 2024 and sell it today you would earn a total of  4,389  from holding AirbnbInc or generate 38.35% return on investment over 90 days.

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

AirbnbInc  vs.  Norwegian Cruise Line

AirbnbInc

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AirbnbInc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AirbnbInc may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Norwegian Cruise Line

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norwegian Cruise Line has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Norwegian Cruise is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with AirbnbInc and Norwegian Cruise

The main advantage of trading using opposite AirbnbInc and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AirbnbInc 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 AirbnbInc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.