Correlation Between Royal Caribbean and Hilton Grand

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

Diversification Opportunities for Royal Caribbean and Hilton Grand

0.8

Correlation Coefficient

Royal Caribbean  Hilton Grand

Very poor diversification

The 3 months correlation between Royal and Hilton is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Hilton Grand Vacations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Grand Vacations 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 Hilton Grand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Grand Vacations has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Hilton Grand go up and down completely randomly.

Pair Corralation between Royal Caribbean and Hilton Grand

Considering the 90-day investment horizon Royal Caribbean Cruises is expected to under-perform the Hilton Grand. In addition to that, Royal Caribbean is 1.28 times more volatile than Hilton Grand Vacations. It trades about -0.02 of its total potential returns per unit of risk. Hilton Grand Vacations is currently generating about -0.02 per unit of volatility. If you would invest  3,960  in Hilton Grand Vacations on December 27, 2024 and sell it today you would lose (173.00) from holding Hilton Grand Vacations or give up 4.37% of portfolio value over 90 days.

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

Royal Caribbean Cruises  vs.  Hilton Grand Vacations

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 quite persistent fundamental indicators, Royal Caribbean is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Hilton Grand Vacations

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hilton Grand Vacations has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Hilton Grand is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Royal Caribbean and Hilton Grand

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

The idea behind Royal Caribbean Cruises and Hilton Grand Vacations 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.