Correlation Between TripAdvisor and Norwegian Cruise

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

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

Diversification Opportunities for TripAdvisor and Norwegian Cruise

0.68

Correlation Coefficient

TripAdvisor  Norwegian Cruise

Poor diversification

The 3 months correlation between TripAdvisor and Norwegian is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding TripAdvisor 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 TripAdvisor 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 TripAdvisor 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 TripAdvisor i.e., TripAdvisor and Norwegian Cruise go up and down completely randomly.

Pair Corralation between TripAdvisor and Norwegian Cruise

Given the investment horizon of 90 days TripAdvisor is expected to generate 1.15 times more return on investment than Norwegian Cruise. However, TripAdvisor is 1.15 times more volatile than Norwegian Cruise Line. It trades about 0.01 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about -0.01 per unit of risk. If you would invest  1,741  in TripAdvisor on August 3, 2025 and sell it today you would lose (135.00) from holding TripAdvisor or give up 7.75% of portfolio value over 90 days.

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

TripAdvisor  vs.  Norwegian Cruise Line

TripAdvisor

Risk-Adjusted Performance

Weakest

Over the last 90 days TripAdvisor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, TripAdvisor is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Norwegian Cruise Line

Risk-Adjusted Performance

Weakest

Over the last 90 days Norwegian Cruise Line has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with TripAdvisor and Norwegian Cruise

The main advantage of trading using opposite TripAdvisor and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TripAdvisor 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 TripAdvisor 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.