Correlation Between Royal Caribbean and Shimano

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

Diversification Opportunities for Royal Caribbean and Shimano

-0.14

Correlation Coefficient

Royal Caribbean  Shimano

Good diversification

The 3 months correlation between Royal and Shimano is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Group and Shimano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano 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 Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Shimano go up and down completely randomly.

Pair Corralation between Royal Caribbean and Shimano

Assuming the 90 days horizon Royal Caribbean Group is expected to under-perform the Shimano. In addition to that, Royal Caribbean is 2.22 times more volatile than Shimano. It trades about -0.02 of its total potential returns per unit of risk. Shimano is currently generating about 0.07 per unit of volatility. If you would invest  13,020  in Shimano on December 26, 2024 and sell it today you would earn a total of  890.00  from holding Shimano or generate 6.84% return on investment over 90 days.

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

Royal Caribbean Group  vs.  Shimano

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 nearly stable basic indicators, Royal Caribbean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Shimano

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shimano are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shimano may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Royal Caribbean and Shimano

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

The idea behind Royal Caribbean Group and Shimano 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.