Correlation Between Royal Caribbean and Kellanova

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

Diversification Opportunities for Royal Caribbean and Kellanova

0.9

Correlation Coefficient

Royal Caribbean  Kellanova

Almost no diversification

The 3 months correlation between Royal and Kellanova is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova 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 Kellanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellanova has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Kellanova go up and down completely randomly.

Pair Corralation between Royal Caribbean and Kellanova

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to generate 1.59 times more return on investment than Kellanova. However, Royal Caribbean is 1.59 times more volatile than Kellanova. It trades about 0.27 of its potential returns per unit of risk. Kellanova is currently generating about 0.16 per unit of risk. If you would invest  50,750  in Royal Caribbean Cruises on October 8, 2024 and sell it today you would earn a total of  19,483  from holding Royal Caribbean Cruises or generate 38.39% return on investment over 90 days.

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

Royal Caribbean Cruises  vs.  Kellanova

Royal Caribbean Cruises

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Cruises are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Royal Caribbean sustained solid returns over the last few months and may actually be approaching a breakup point.

Kellanova

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kellanova sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Caribbean and Kellanova

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

The idea behind Royal Caribbean Cruises and Kellanova 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 CEOs Directory module to screen CEOs from public companies around the world.