Correlation Between AUTO TRADER and Royal Caribbean
Can any of the company-specific risk be diversified away by investing in both AUTO TRADER 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 AUTO TRADER and Royal Caribbean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AUTO TRADER ADR and Royal Caribbean Group, you can compare the effects of market volatilities on AUTO TRADER 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 AUTO TRADER with a short position of Royal Caribbean. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTO TRADER and Royal Caribbean.
Diversification Opportunities for AUTO TRADER and Royal Caribbean
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between AUTO and Royal is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding AUTO TRADER ADR 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 AUTO TRADER 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 AUTO TRADER ADR 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 AUTO TRADER i.e., AUTO TRADER and Royal Caribbean go up and down completely randomly.
Pair Corralation between AUTO TRADER and Royal Caribbean
Assuming the 90 days trading horizon AUTO TRADER ADR is expected to under-perform the Royal Caribbean. But the stock apears to be less risky and, when comparing its historical volatility, AUTO TRADER ADR is 1.21 times less risky than Royal Caribbean. The stock trades about -0.08 of its potential returns per unit of risk. The Royal Caribbean Group is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 19,210 in Royal Caribbean Group on August 31, 2024 and sell it today you would earn a total of 3,735 from holding Royal Caribbean Group or generate 19.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AUTO TRADER ADR vs. Royal Caribbean Group
Performance |
| Timeline |
| AUTO TRADER ADR |
| Royal Caribbean Group |
AUTO TRADER and Royal Caribbean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AUTO TRADER and Royal Caribbean
The main advantage of trading using opposite AUTO TRADER and Royal Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUTO TRADER 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.| AUTO TRADER vs. Alphabet Class A | AUTO TRADER vs. Alphabet Class A | AUTO TRADER vs. Meta Platforms | AUTO TRADER vs. Tencent Holdings |
| Royal Caribbean vs. Li Ning Company | Royal Caribbean vs. Trip Group Limited | Royal Caribbean vs. Superior Plus Corp | Royal Caribbean vs. NMI Holdings |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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