Correlation Between Royal Caribbean and Gen Digital

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

Diversification Opportunities for Royal Caribbean and Gen Digital

0.03

Correlation Coefficient

Royal Caribbean  Gen Digital

Significant diversification

The 3 months correlation between Royal and Gen is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Gen Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gen Digital 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 Gen Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gen Digital has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Gen Digital go up and down completely randomly.

Pair Corralation between Royal Caribbean and Gen Digital

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to under-perform the Gen Digital. In addition to that, Royal Caribbean is 5.3 times more volatile than Gen Digital. It trades about -0.07 of its total potential returns per unit of risk. Gen Digital is currently generating about -0.12 per unit of volatility. If you would invest  17,839  in Gen Digital on December 29, 2024 and sell it today you would lose (839.00) from holding Gen Digital or give up 4.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Royal Caribbean Cruises  vs.  Gen Digital

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 weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gen Digital

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Royal Caribbean Cruises and Gen Digital 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..