Correlation Between Royal Caribbean and Micron Technology

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

Diversification Opportunities for Royal Caribbean and Micron Technology

-0.14

Correlation Coefficient

Royal Caribbean  Micron Technology

Good diversification

The 3 months correlation between Royal and Micron is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Micron Technology go up and down completely randomly.

Pair Corralation between Royal Caribbean and Micron Technology

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to generate 0.39 times more return on investment than Micron Technology. However, Royal Caribbean Cruises is 2.54 times less risky than Micron Technology. It trades about -0.16 of its potential returns per unit of risk. Micron Technology is currently generating about -0.07 per unit of risk. If you would invest  75,103  in Royal Caribbean Cruises on October 6, 2024 and sell it today you would lose (4,870) from holding Royal Caribbean Cruises or give up 6.48% of portfolio value over 90 days.

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

Royal Caribbean Cruises  vs.  Micron Technology

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.

Micron Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Micron Technology 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 Micron Technology

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

The idea behind Royal Caribbean Cruises and Micron 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.

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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.