Correlation Between Royal Caribbean and Check Point

Can any of the company-specific risk be diversified away by investing in both Royal Caribbean and Check Point 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 Check Point 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 Check Point Software, you can compare the effects of market volatilities on Royal Caribbean and Check Point 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 Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Caribbean and Check Point.

Diversification Opportunities for Royal Caribbean and Check Point

0.79

Correlation Coefficient

Royal Caribbean  Check Point

Poor diversification

The 3 months correlation between Royal and Check is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Check Point go up and down completely randomly.

Pair Corralation between Royal Caribbean and Check Point

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to under-perform the Check Point. But the stock apears to be less risky and, when comparing its historical volatility, Royal Caribbean Cruises is 1.37 times less risky than Check Point. The stock trades about -0.15 of its potential returns per unit of risk. The Check Point Software is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  50,796  in Check Point Software on October 5, 2024 and sell it today you would earn a total of  7,958  from holding Check Point Software or generate 15.67% return on investment over 90 days.

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

Royal Caribbean Cruises  vs.  Check Point Software

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.

Check Point Software

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Check Point sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Caribbean and Check Point

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

The idea behind Royal Caribbean Cruises and Check Point Software 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.