Correlation Between HSBC Holdings and Royal Caribbean
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings 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 HSBC Holdings and Royal Caribbean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings plc and Royal Caribbean Cruises, you can compare the effects of market volatilities on HSBC Holdings 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 HSBC Holdings with a short position of Royal Caribbean. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Royal Caribbean.
Diversification Opportunities for HSBC Holdings and Royal Caribbean
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between HSBC and Royal is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Royal Caribbean Cruises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Caribbean Cruises and HSBC Holdings 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 HSBC Holdings plc 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 Cruises has no effect on the direction of HSBC Holdings i.e., HSBC Holdings and Royal Caribbean go up and down completely randomly.
Pair Corralation between HSBC Holdings and Royal Caribbean
Assuming the 90 days trading horizon HSBC Holdings is expected to generate 2.07 times less return on investment than Royal Caribbean. But when comparing it to its historical volatility, HSBC Holdings plc is 1.0 times less risky than Royal Caribbean. It trades about 0.08 of its potential returns per unit of risk. Royal Caribbean Cruises is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 21,443 in Royal Caribbean Cruises on August 31, 2024 and sell it today you would earn a total of 51,917 from holding Royal Caribbean Cruises or generate 242.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.67% |
| Values | Daily Returns |
HSBC Holdings plc vs. Royal Caribbean Cruises
Performance |
| Timeline |
| HSBC Holdings plc |
| Royal Caribbean Cruises |
HSBC Holdings and Royal Caribbean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Royal Caribbean
The main advantage of trading using opposite HSBC Holdings and Royal Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings 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.| HSBC Holdings vs. Unifique Telecomunicaes SA | HSBC Holdings vs. Charter Communications | HSBC Holdings vs. G2D Investments | HSBC Holdings vs. Taiwan Semiconductor Manufacturing |
| Royal Caribbean vs. Lupatech SA | Royal Caribbean vs. Charter Communications | Royal Caribbean vs. Automatic Data Processing | Royal Caribbean vs. Cognizant Technology Solutions |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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