Correlation Between Royal Caribbean and United States

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

Diversification Opportunities for Royal Caribbean and United States

0.05

Correlation Coefficient

Royal Caribbean  United States

Significant diversification

The 3 months correlation between Royal and United is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and United States go up and down completely randomly.

Pair Corralation between Royal Caribbean and United States

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to generate 0.71 times more return on investment than United States. However, Royal Caribbean Cruises is 1.41 times less risky than United States. It trades about 0.29 of its potential returns per unit of risk. United States Steel is currently generating about 0.01 per unit of risk. If you would invest  49,092  in Royal Caribbean Cruises on October 7, 2024 and sell it today you would earn a total of  21,141  from holding Royal Caribbean Cruises or generate 43.06% return on investment over 90 days.

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

Royal Caribbean Cruises  vs.  United States Steel

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.

United States Steel

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Royal Caribbean Cruises and United States Steel 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.