Correlation Between Royal Caribbean and Norwegian Cruise
Can any of the company-specific risk be diversified away by investing in both Royal Caribbean and Norwegian Cruise 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 Norwegian Cruise 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 Norwegian Cruise Line, you can compare the effects of market volatilities on Royal Caribbean and Norwegian Cruise 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 Norwegian Cruise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Caribbean and Norwegian Cruise.
Diversification Opportunities for Royal Caribbean and Norwegian Cruise
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Royal and Norwegian is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Norwegian Cruise Line in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Cruise Line 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 Norwegian Cruise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Cruise Line has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Norwegian Cruise go up and down completely randomly.
Pair Corralation between Royal Caribbean and Norwegian Cruise
Considering the 90-day investment horizon Royal Caribbean Cruises is expected to generate 0.89 times more return on investment than Norwegian Cruise. However, Royal Caribbean Cruises is 1.12 times less risky than Norwegian Cruise. It trades about 0.34 of its potential returns per unit of risk. Norwegian Cruise Line is currently generating about 0.25 per unit of risk. If you would invest 20,114 in Royal Caribbean Cruises on August 24, 2024 and sell it today you would earn a total of 3,643 from holding Royal Caribbean Cruises or generate 18.11% 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. Norwegian Cruise Line
Performance |
| Timeline |
| Royal Caribbean Cruises |
| Norwegian Cruise Line |
Royal Caribbean and Norwegian Cruise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Caribbean and Norwegian Cruise
The main advantage of trading using opposite Royal Caribbean and Norwegian Cruise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Caribbean position performs unexpectedly, Norwegian Cruise 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 Norwegian Cruise will offset losses from the drop in Norwegian Cruise's long position.| Royal Caribbean vs. Carnival | Royal Caribbean vs. Airbnb Inc | Royal Caribbean vs. Expedia Group | Royal Caribbean vs. Booking Holdings |
| Norwegian Cruise vs. Carnival | Norwegian Cruise vs. Airbnb Inc | Norwegian Cruise vs. Expedia Group | Norwegian Cruise 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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