Correlation Between Royal Caribbean and CyberArk Software

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

By analyzing existing cross correlation between Royal Caribbean Group and CyberArk Software, you can compare the effects of market volatilities on Royal Caribbean and CyberArk Software 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 CyberArk Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Caribbean and CyberArk Software.

Diversification Opportunities for Royal Caribbean and CyberArk Software

0.94

Correlation Coefficient

Royal Caribbean  CyberArk Software

Almost no diversification

The 3 months correlation between Royal and CyberArk is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Group and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software 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 Group are associated (or correlated) with CyberArk Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberArk Software has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and CyberArk Software go up and down completely randomly.

Pair Corralation between Royal Caribbean and CyberArk Software

Assuming the 90 days horizon Royal Caribbean Group is expected to generate 0.79 times more return on investment than CyberArk Software. However, Royal Caribbean Group is 1.27 times less risky than CyberArk Software. It trades about 0.36 of its potential returns per unit of risk. CyberArk Software is currently generating about 0.12 per unit of risk. If you would invest  15,177  in Royal Caribbean Group on September 13, 2024 and sell it today you would earn a total of  8,573  from holding Royal Caribbean Group or generate 56.49% 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 Group  vs.  CyberArk Software

Royal Caribbean Group

Risk-Adjusted Performance

28 of 100

Strong

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

CyberArk Software

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CyberArk Software are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CyberArk Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Caribbean and CyberArk Software

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

The idea behind Royal Caribbean Group and CyberArk Software 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.