Correlation Between AUST AGRICULTURAL and Royal Caribbean

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

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

Diversification Opportunities for AUST AGRICULTURAL and Royal Caribbean

-0.61

Correlation Coefficient

AUST AGRICULTURAL  Royal Caribbean

Excellent diversification

The 3 months correlation between AUST and Royal is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL 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 AUST AGRICULTURAL 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 AUST AGRICULTURAL 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 AUST AGRICULTURAL i.e., AUST AGRICULTURAL and Royal Caribbean go up and down completely randomly.

Pair Corralation between AUST AGRICULTURAL and Royal Caribbean

Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to under-perform the Royal Caribbean. But the stock apears to be less risky and, when comparing its historical volatility, AUST AGRICULTURAL is 1.8 times less risky than Royal Caribbean. The stock trades about -0.03 of its potential returns per unit of risk. The Royal Caribbean Group is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  15,428  in Royal Caribbean Group on September 15, 2024 and sell it today you would earn a total of  8,322  from holding Royal Caribbean Group or generate 53.94% return on investment over 90 days.

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

AUST AGRICULTURAL  vs.  Royal Caribbean Group

AUST AGRICULTURAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUST AGRICULTURAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AUST AGRICULTURAL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Royal Caribbean Group

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Group are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Royal Caribbean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AUST AGRICULTURAL and Royal Caribbean

The main advantage of trading using opposite AUST AGRICULTURAL and Royal Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUST AGRICULTURAL 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 AUST AGRICULTURAL 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.