Correlation Between Royal Caribbean and Booking Holdings

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

Diversification Opportunities for Royal Caribbean and Booking Holdings

0.7

Correlation Coefficient

Royal Caribbean  Booking Holdings

Poor diversification

The 3 months correlation between Royal and Booking is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Group and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Booking Holdings go up and down completely randomly.

Pair Corralation between Royal Caribbean and Booking Holdings

Assuming the 90 days horizon Royal Caribbean Group is expected to under-perform the Booking Holdings. In addition to that, Royal Caribbean is 1.64 times more volatile than Booking Holdings. It trades about -0.05 of its total potential returns per unit of risk. Booking Holdings is currently generating about -0.06 per unit of volatility. If you would invest  477,229  in Booking Holdings on December 30, 2024 and sell it today you would lose (48,229) from holding Booking Holdings or give up 10.11% of portfolio value over 90 days.

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

Royal Caribbean Group  vs.  Booking Holdings

Royal Caribbean Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Caribbean Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Booking Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Booking Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Royal Caribbean and Booking Holdings

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

The idea behind Royal Caribbean Group and Booking Holdings 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 CEOs Directory module to screen CEOs from public companies around the world.