Correlation Between Booking Holdings and Royal Caribbean

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

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

Diversification Opportunities for Booking Holdings and Royal Caribbean

0.52

Correlation Coefficient

Booking Holdings  Royal Caribbean

Very weak diversification

The 3 months correlation between Booking and Royal is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Booking Holdings 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 Booking Holdings 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 Booking Holdings 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 Booking Holdings i.e., Booking Holdings and Royal Caribbean go up and down completely randomly.

Pair Corralation between Booking Holdings and Royal Caribbean

Given the investment horizon of 90 days Booking Holdings is expected to generate 0.6 times more return on investment than Royal Caribbean. However, Booking Holdings is 1.66 times less risky than Royal Caribbean. It trades about -0.05 of its potential returns per unit of risk. Royal Caribbean Cruises is currently generating about -0.04 per unit of risk. If you would invest  498,067  in Booking Holdings on December 28, 2024 and sell it today you would lose (34,643) from holding Booking Holdings or give up 6.96% of portfolio value over 90 days.

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

Booking Holdings  vs.  Royal Caribbean Cruises

Booking Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Booking Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Royal Caribbean Cruises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Caribbean Cruises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Booking Holdings and Royal Caribbean

The main advantage of trading using opposite Booking Holdings and Royal Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Booking Holdings 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 Booking Holdings 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.