Correlation Between Royal Caribbean and Itasa Investimentos

Can any of the company-specific risk be diversified away by investing in both Royal Caribbean and Itasa Investimentos 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 Itasa Investimentos 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 Itasa Investimentos, you can compare the effects of market volatilities on Royal Caribbean and Itasa Investimentos 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 Itasa Investimentos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Caribbean and Itasa Investimentos.

Diversification Opportunities for Royal Caribbean and Itasa Investimentos

-0.8

Correlation Coefficient

Royal Caribbean  Itasa Investimentos

Pay attention - limited upside

The 3 months correlation between Royal and Itasa is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Itasa Investimentos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itasa Investimentos 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 Itasa Investimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itasa Investimentos has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Itasa Investimentos go up and down completely randomly.

Pair Corralation between Royal Caribbean and Itasa Investimentos

Assuming the 90 days trading horizon Royal Caribbean Cruises is expected to generate 1.59 times more return on investment than Itasa Investimentos. However, Royal Caribbean is 1.59 times more volatile than Itasa Investimentos. It trades about 0.36 of its potential returns per unit of risk. Itasa Investimentos is currently generating about -0.1 per unit of risk. If you would invest  47,282  in Royal Caribbean Cruises on September 2, 2024 and sell it today you would earn a total of  26,593  from holding Royal Caribbean Cruises or generate 56.24% return on investment over 90 days.

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

Royal Caribbean Cruises  vs.  Itasa Investimentos

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 somewhat uncertain fundamental indicators, Royal Caribbean sustained solid returns over the last few months and may actually be approaching a breakup point.

Itasa Investimentos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itasa Investimentos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Royal Caribbean and Itasa Investimentos

The main advantage of trading using opposite Royal Caribbean and Itasa Investimentos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Caribbean position performs unexpectedly, Itasa Investimentos 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 Itasa Investimentos will offset losses from the drop in Itasa Investimentos' long position.

The idea behind Royal Caribbean Cruises and Itasa Investimentos 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.