Correlation Between Royal Caribbean and Align Technology

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

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

Diversification Opportunities for Royal Caribbean and Align Technology

0.81

Correlation Coefficient

Royal Caribbean  Align Technology

Very poor diversification

The 3 months correlation between Royal and Align is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Royal Caribbean 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 Royal Caribbean Cruises are associated (or correlated) with Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Align Technology go up and down completely randomly.

Pair Corralation between Royal Caribbean and Align Technology

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to generate 1.23 times more return on investment than Align Technology. However, Royal Caribbean is 1.23 times more volatile than Align Technology. It trades about 0.22 of its potential returns per unit of risk. Align Technology is currently generating about 0.07 per unit of risk. If you would invest  57,387  in Royal Caribbean Cruises on October 22, 2024 and sell it today you would earn a total of  16,311  from holding Royal Caribbean Cruises or generate 28.42% return on investment over 90 days.

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

Royal Caribbean Cruises  vs.  Align Technology

Royal Caribbean Cruises

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Cruises are ranked lower than 17 (%) 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.

Align Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Align Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Royal Caribbean and Align Technology

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

The idea behind Royal Caribbean Cruises and Align Technology 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.