Correlation Between Royal Caribbean and Carnival
Can any of the company-specific risk be diversified away by investing in both Royal Caribbean and Carnival 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 Carnival 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 Carnival, you can compare the effects of market volatilities on Royal Caribbean and Carnival 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 Carnival. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Caribbean and Carnival.
Diversification Opportunities for Royal Caribbean and Carnival
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Royal and Carnival is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival 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 Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Carnival go up and down completely randomly.
Pair Corralation between Royal Caribbean and Carnival
Considering the 90-day investment horizon Royal Caribbean is expected to generate 1.12 times less return on investment than Carnival. In addition to that, Royal Caribbean is 1.06 times more volatile than Carnival. It trades about 0.34 of its total potential returns per unit of risk. Carnival is currently generating about 0.41 per unit of volatility. If you would invest 2,100 in Carnival on August 24, 2024 and sell it today you would earn a total of 435.00 from holding Carnival or generate 20.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Caribbean Cruises vs. Carnival
Performance |
| Timeline |
| Royal Caribbean Cruises |
| Carnival |
Royal Caribbean and Carnival Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Caribbean and Carnival
The main advantage of trading using opposite Royal Caribbean and Carnival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Caribbean position performs unexpectedly, Carnival 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 Carnival will offset losses from the drop in Carnival's long position.| Royal Caribbean vs. Carnival | Royal Caribbean vs. Airbnb Inc | Royal Caribbean vs. Expedia Group | Royal Caribbean vs. Booking Holdings |
| Carnival vs. Royal Caribbean Cruises | Carnival vs. Airbnb Inc | Carnival vs. Expedia Group | Carnival vs. Booking 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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