Correlation Between Royal Caribbean and Oriental Land

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

Diversification Opportunities for Royal Caribbean and Oriental Land

0.12

Correlation Coefficient

Royal Caribbean  Oriental Land

Average diversification

The 3 months correlation between Royal and Oriental is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Group and Oriental Land Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Land 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 Oriental Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Land has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Oriental Land go up and down completely randomly.

Pair Corralation between Royal Caribbean and Oriental Land

Assuming the 90 days horizon Royal Caribbean Group is expected to generate 1.32 times more return on investment than Oriental Land. However, Royal Caribbean is 1.32 times more volatile than Oriental Land Co. It trades about -0.01 of its potential returns per unit of risk. Oriental Land Co is currently generating about -0.13 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	Insignificant
Accuracy	95.45%
Values	Daily Returns

Royal Caribbean Group  vs.  Oriental Land Co

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.

Oriental Land

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Land Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Oriental Land reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Caribbean and Oriental Land

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

The idea behind Royal Caribbean Group and Oriental Land Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.