Correlation Between Pure Storage and Royal Caribbean

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

By analyzing existing cross correlation between Pure Storage and Royal Caribbean Group, you can compare the effects of market volatilities on Pure Storage and Royal Caribbean 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 Pure Storage with a short position of Royal Caribbean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Storage and Royal Caribbean.

Diversification Opportunities for Pure Storage and Royal Caribbean

0.36

Correlation Coefficient

Pure Storage  Royal Caribbean

Weak diversification

The 3 months correlation between Pure and Royal is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Pure Storage and Royal Caribbean Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Caribbean Group and Pure Storage 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 Pure Storage are associated (or correlated) with Royal Caribbean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Caribbean Group has no effect on the direction of Pure Storage i.e., Pure Storage and Royal Caribbean go up and down completely randomly.

Pair Corralation between Pure Storage and Royal Caribbean

Assuming the 90 days horizon Pure Storage is expected to under-perform the Royal Caribbean. In addition to that, Pure Storage is 1.27 times more volatile than Royal Caribbean Group. It trades about -0.27 of its total potential returns per unit of risk. Royal Caribbean Group is currently generating about -0.18 per unit of volatility. If you would invest  25,720  in Royal Caribbean Group on December 4, 2024 and sell it today you would lose (2,635) from holding Royal Caribbean Group or give up 10.24% of portfolio value over 90 days.

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

Pure Storage  vs.  Royal Caribbean Group

Pure Storage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pure Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Royal Caribbean Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Pure Storage and Royal Caribbean

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

The idea behind Pure Storage and Royal Caribbean Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.