Correlation Between Adyen NV and Royal Caribbean

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

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

Diversification Opportunities for Adyen NV and Royal Caribbean

-0.14

Correlation Coefficient

Adyen NV  Royal Caribbean

Good diversification

The 3 months correlation between Adyen and Royal is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Adyen NV and Royal Caribbean Cruises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Caribbean Cruises and Adyen NV 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 Adyen NV 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 Cruises has no effect on the direction of Adyen NV i.e., Adyen NV and Royal Caribbean go up and down completely randomly.

Pair Corralation between Adyen NV and Royal Caribbean

Assuming the 90 days horizon Adyen NV is expected to generate 3.73 times less return on investment than Royal Caribbean. In addition to that, Adyen NV is 1.26 times more volatile than Royal Caribbean Cruises. It trades about 0.04 of its total potential returns per unit of risk. Royal Caribbean Cruises is currently generating about 0.17 per unit of volatility. If you would invest  30,049  in Royal Caribbean Cruises on October 5, 2024 and sell it today you would earn a total of  40,391  from holding Royal Caribbean Cruises or generate 134.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Adyen NV  vs.  Royal Caribbean Cruises

Adyen NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adyen NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Adyen NV is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Royal Caribbean Cruises

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Cruises are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Royal Caribbean sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adyen NV and Royal Caribbean

The main advantage of trading using opposite Adyen NV and Royal Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adyen NV 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 Adyen NV and Royal Caribbean Cruises 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.