Correlation Between Xtrackers ShortDAX and Royal Caribbean

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

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

Diversification Opportunities for Xtrackers ShortDAX and Royal Caribbean

0.28

Correlation Coefficient

Xtrackers ShortDAX  Royal Caribbean

Modest diversification

The 3 months correlation between Xtrackers and Royal is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers ShortDAX 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 Xtrackers ShortDAX 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 Xtrackers ShortDAX 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 Xtrackers ShortDAX i.e., Xtrackers ShortDAX and Royal Caribbean go up and down completely randomly.

Pair Corralation between Xtrackers ShortDAX and Royal Caribbean

Assuming the 90 days trading horizon Xtrackers ShortDAX is expected to under-perform the Royal Caribbean. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers ShortDAX is 1.79 times less risky than Royal Caribbean. The etf trades about -0.17 of its potential returns per unit of risk. The Royal Caribbean Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  22,079  in Royal Caribbean Group on December 30, 2024 and sell it today you would lose (3,085) from holding Royal Caribbean Group or give up 13.97% of portfolio value over 90 days.

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

Xtrackers ShortDAX  vs.  Royal Caribbean Group

Xtrackers ShortDAX

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers ShortDAX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf'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 Exchange Traded Fund 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 latest fragile 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.

Pair Trading with Xtrackers ShortDAX and Royal Caribbean

The main advantage of trading using opposite Xtrackers ShortDAX and Royal Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers ShortDAX 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 Xtrackers ShortDAX 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.