Correlation Between Royal Caribbean and Hartford Financial

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

Diversification Opportunities for Royal Caribbean and Hartford Financial

0.61

Correlation Coefficient

Royal Caribbean  Hartford Financial

Poor diversification

The 3 months correlation between Royal and Hartford is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and The Hartford Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Hartford Financial 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 Hartford Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Hartford Financial has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Hartford Financial go up and down completely randomly.

Pair Corralation between Royal Caribbean and Hartford Financial

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to generate 41.48 times more return on investment than Hartford Financial. However, Royal Caribbean is 41.48 times more volatile than The Hartford Financial. It trades about 0.16 of its potential returns per unit of risk. The Hartford Financial is currently generating about 0.13 per unit of risk. If you would invest  58,012  in Royal Caribbean Cruises on October 26, 2024 and sell it today you would earn a total of  12,156  from holding Royal Caribbean Cruises or generate 20.95% 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.  The Hartford Financial

Royal Caribbean Cruises

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Cruises are ranked lower than 12 (%) 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.

The Hartford Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Hartford Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royal Caribbean and Hartford Financial

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

The idea behind Royal Caribbean Cruises and The Hartford Financial 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.