Correlation Between Dine Brands and Royal Caribbean

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

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

Diversification Opportunities for Dine Brands and Royal Caribbean

0.67

Correlation Coefficient

Dine Brands  Royal Caribbean

Poor diversification

The 3 months correlation between Dine and Royal is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dine Brands Global 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 Dine Brands 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 Dine Brands Global 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 Dine Brands i.e., Dine Brands and Royal Caribbean go up and down completely randomly.

Pair Corralation between Dine Brands and Royal Caribbean

Considering the 90-day investment horizon Dine Brands is expected to generate 2.08 times less return on investment than Royal Caribbean. In addition to that, Dine Brands is 1.93 times more volatile than Royal Caribbean Cruises. It trades about 0.09 of its total potential returns per unit of risk. Royal Caribbean Cruises is currently generating about 0.36 per unit of volatility. If you would invest  15,928  in Royal Caribbean Cruises on August 31, 2024 and sell it today you would earn a total of  8,234  from holding Royal Caribbean Cruises or generate 51.7% return on investment over 90 days.

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

Dine Brands Global  vs.  Royal Caribbean Cruises

Dine Brands Global

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Dine Brands displayed solid returns over the last few months and may actually be approaching a breakup point.

Royal Caribbean Cruises

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Cruises are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Royal Caribbean disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dine Brands and Royal Caribbean

The main advantage of trading using opposite Dine Brands and Royal Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dine Brands 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 Dine Brands Global and Royal Caribbean Cruises 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.