Correlation Between Royal Caribbean and So Carlos

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

Diversification Opportunities for Royal Caribbean and So Carlos

0.36

Correlation Coefficient

Royal Caribbean  So Carlos

Weak diversification

The 3 months correlation between Royal and SCAR3 is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and So Carlos Empreendimentos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on So Carlos Empreendimentos 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 So Carlos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of So Carlos Empreendimentos has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and So Carlos go up and down completely randomly.

Pair Corralation between Royal Caribbean and So Carlos

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to under-perform the So Carlos. But the stock apears to be less risky and, when comparing its historical volatility, Royal Caribbean Cruises is 1.09 times less risky than So Carlos. The stock trades about -0.02 of its potential returns per unit of risk. The So Carlos Empreendimentos is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,828  in So Carlos Empreendimentos on December 5, 2024 and sell it today you would earn a total of  49.00  from holding So Carlos Empreendimentos or generate 2.68% return on investment over 90 days.

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

Royal Caribbean Cruises  vs.  So Carlos Empreendimentos

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.

So Carlos Empreendimentos

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in So Carlos Empreendimentos are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, So Carlos is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Royal Caribbean and So Carlos

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

The idea behind Royal Caribbean Cruises and So Carlos Empreendimentos 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.