Correlation Between Royal Caribbean and Pfizer

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

Diversification Opportunities for Royal Caribbean and Pfizer

-0.3

Correlation Coefficient

Royal Caribbean  Pfizer

Very good diversification

The 3 months correlation between Royal and Pfizer is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Pfizer go up and down completely randomly.

Pair Corralation between Royal Caribbean and Pfizer

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to under-perform the Pfizer. In addition to that, Royal Caribbean is 1.55 times more volatile than Pfizer Inc. It trades about -0.09 of its total potential returns per unit of risk. Pfizer Inc is currently generating about 0.05 per unit of volatility. If you would invest  3,812  in Pfizer Inc on December 3, 2024 and sell it today you would earn a total of  58.00  from holding Pfizer Inc or generate 1.52% return on investment over 90 days.

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

Royal Caribbean Cruises  vs.  Pfizer Inc

Royal Caribbean Cruises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Caribbean Cruises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Royal Caribbean is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pfizer Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pfizer Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Pfizer 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 Pfizer

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

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