Correlation Between Royal Caribbean and APA
Can any of the company-specific risk be diversified away by investing in both Royal Caribbean and APA 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 APA 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 APA Corporation, you can compare the effects of market volatilities on Royal Caribbean and APA 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 APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Caribbean and APA.
Diversification Opportunities for Royal Caribbean and APA
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Royal and APA is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation 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 APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and APA go up and down completely randomly.
Pair Corralation between Royal Caribbean and APA
Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to generate 0.94 times more return on investment than APA. However, Royal Caribbean Cruises is 1.07 times less risky than APA. It trades about 0.27 of its potential returns per unit of risk. APA Corporation is currently generating about -0.12 per unit of risk. If you would invest 58,026 in Royal Caribbean Cruises on September 24, 2024 and sell it today you would earn a total of 14,891 from holding Royal Caribbean Cruises or generate 25.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Royal Caribbean Cruises vs. APA Corp.
Performance |
Timeline |
Royal Caribbean Cruises |
APA Corporation |
Royal Caribbean and APA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Royal Caribbean and APA
The main advantage of trading using opposite Royal Caribbean and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Caribbean position performs unexpectedly, APA 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 APA will offset losses from the drop in APA's long position.Royal Caribbean vs. Booking Holdings | Royal Caribbean vs. Expedia Group | Royal Caribbean vs. Carnival plc | Royal Caribbean vs. Norwegian Cruise Line |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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