Correlation Between Royal Caribbean and Mondee Holdings

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

Diversification Opportunities for Royal Caribbean and Mondee Holdings

-0.76

Correlation Coefficient

Royal Caribbean  Mondee Holdings

Pay attention - limited upside

The 3 months correlation between Royal and Mondee is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Mondee Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondee 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 Cruises are associated (or correlated) with Mondee Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondee Holdings has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Mondee Holdings go up and down completely randomly.

Pair Corralation between Royal Caribbean and Mondee Holdings

Considering the 90-day investment horizon Royal Caribbean Cruises is expected to generate 0.14 times more return on investment than Mondee Holdings. However, Royal Caribbean Cruises is 7.37 times less risky than Mondee Holdings. It trades about 0.33 of its potential returns per unit of risk. Mondee Holdings is currently generating about -0.31 per unit of risk. If you would invest  16,518  in Royal Caribbean Cruises on September 12, 2024 and sell it today you would earn a total of  8,034  from holding Royal Caribbean Cruises or generate 48.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Royal Caribbean Cruises  vs.  Mondee Holdings

Royal Caribbean Cruises

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Cruises are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Royal Caribbean disclosed solid returns over the last few months and may actually be approaching a breakup point.

Mondee Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondee Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Royal Caribbean and Mondee Holdings

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

The idea behind Royal Caribbean Cruises and Mondee 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.

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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.