Correlation Between Royal Caribbean and Waste Management

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

Diversification Opportunities for Royal Caribbean and Waste Management

-0.04

Correlation Coefficient

Royal Caribbean  Waste Management

Good diversification

The 3 months correlation between Royal and Waste is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Waste Management go up and down completely randomly.

Pair Corralation between Royal Caribbean and Waste Management

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to under-perform the Waste Management. In addition to that, Royal Caribbean is 3.14 times more volatile than Waste Management. It trades about -0.07 of its total potential returns per unit of risk. Waste Management is currently generating about 0.03 per unit of volatility. If you would invest  63,338  in Waste Management on December 24, 2024 and sell it today you would earn a total of  925.00  from holding Waste Management or generate 1.46% 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.  Waste Management

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 uncertain 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.

Waste Management

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Waste Management 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 Waste Management

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

The idea behind Royal Caribbean Cruises and Waste Management 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.