Correlation Between Asian Sea and NCL International

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

By analyzing existing cross correlation between Asian Sea and NCL International Logistics, you can compare the effects of market volatilities on Asian Sea and NCL International 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 Asian Sea with a short position of NCL International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asian Sea and NCL International.

Diversification Opportunities for Asian Sea and NCL International

-0.09

Correlation Coefficient

Asian Sea  NCL International

Good diversification

The 3 months correlation between Asian and NCL is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Asian Sea and NCL International Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCL International and Asian Sea 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 Asian Sea are associated (or correlated) with NCL International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCL International has no effect on the direction of Asian Sea i.e., Asian Sea and NCL International go up and down completely randomly.

Pair Corralation between Asian Sea and NCL International

Assuming the 90 days trading horizon Asian Sea is expected to under-perform the NCL International. But the stock apears to be less risky and, when comparing its historical volatility, Asian Sea is 34.83 times less risky than NCL International. The stock trades about -0.04 of its potential returns per unit of risk. The NCL International Logistics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  58.00  in NCL International Logistics on August 28, 2024 and sell it today you would lose (16.00) from holding NCL International Logistics or give up 27.59% of portfolio value over 90 days.

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

Asian Sea  vs.  NCL International Logistics

Asian Sea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asian Sea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

NCL International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NCL International Logistics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, NCL International disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asian Sea and NCL International

The main advantage of trading using opposite Asian Sea and NCL International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asian Sea position performs unexpectedly, NCL International 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 NCL International will offset losses from the drop in NCL International's long position.

The idea behind Asian Sea and NCL International Logistics 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.