Correlation Between Shimano and Royal Caribbean

Can any of the company-specific risk be diversified away by investing in both Shimano and Royal Caribbean 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 Shimano and Royal Caribbean into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shimano and Royal Caribbean Group, you can compare the effects of market volatilities on Shimano and Royal Caribbean 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 Shimano with a short position of Royal Caribbean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shimano and Royal Caribbean.

Diversification Opportunities for Shimano and Royal Caribbean

-0.2

Correlation Coefficient

Shimano  Royal Caribbean

Good diversification

The 3 months correlation between Shimano and Royal is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Shimano and Royal Caribbean Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Caribbean Group and Shimano 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 Shimano are associated (or correlated) with Royal Caribbean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Caribbean Group has no effect on the direction of Shimano i.e., Shimano and Royal Caribbean go up and down completely randomly.

Pair Corralation between Shimano and Royal Caribbean

Assuming the 90 days horizon Shimano is expected to generate 0.47 times more return on investment than Royal Caribbean. However, Shimano is 2.15 times less risky than Royal Caribbean. It trades about 0.04 of its potential returns per unit of risk. Royal Caribbean Group is currently generating about -0.02 per unit of risk. If you would invest  12,710  in Shimano on December 29, 2024 and sell it today you would earn a total of  390.00  from holding Shimano or generate 3.07% return on investment over 90 days.

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

Shimano  vs.  Royal Caribbean Group

Shimano

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shimano are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Shimano is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Shimano and Royal Caribbean

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

The idea behind Shimano and Royal Caribbean Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.