Correlation Between Royal Caribbean and USWE SPORTS

Can any of the company-specific risk be diversified away by investing in both Royal Caribbean and USWE SPORTS 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 USWE SPORTS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Royal Caribbean Group and USWE SPORTS AB, you can compare the effects of market volatilities on Royal Caribbean and USWE SPORTS 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 USWE SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Caribbean and USWE SPORTS.

Diversification Opportunities for Royal Caribbean and USWE SPORTS

0.88

Correlation Coefficient

Royal Caribbean  USWE SPORTS

Very poor diversification

The 3 months correlation between Royal and USWE is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Group and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB 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 Group are associated (or correlated) with USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and USWE SPORTS go up and down completely randomly.

Pair Corralation between Royal Caribbean and USWE SPORTS

Assuming the 90 days horizon Royal Caribbean Group is expected to generate 0.9 times more return on investment than USWE SPORTS. However, Royal Caribbean Group is 1.12 times less risky than USWE SPORTS. It trades about -0.01 of its potential returns per unit of risk. USWE SPORTS AB is currently generating about -0.12 per unit of risk. If you would invest  23,160  in Royal Caribbean Group on September 25, 2024 and sell it today you would lose (140.00) from holding Royal Caribbean Group or give up 0.6% of portfolio value over 90 days.

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

Royal Caribbean Group  vs.  USWE SPORTS AB

Royal Caribbean Group

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Royal Caribbean reported solid returns over the last few months and may actually be approaching a breakup point.

USWE SPORTS AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, USWE SPORTS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Caribbean and USWE SPORTS

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

The idea behind Royal Caribbean Group and USWE SPORTS AB 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.