Correlation Between Royal Caribbean and Nike

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

Diversification Opportunities for Royal Caribbean and Nike

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Royal and Nike is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Royal Caribbean Cruises and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Royal Caribbean i.e., Royal Caribbean and Nike go up and down completely randomly.

Pair Corralation between Royal Caribbean and Nike

Considering the 90-day investment horizon Royal Caribbean Cruises is expected to generate 1.56 times more return on investment than Nike. However, Royal Caribbean is 1.56 times more volatile than Nike Inc. It trades about 0.02 of its potential returns per unit of risk. Nike Inc is currently generating about -0.23 per unit of risk. If you would invest  4,379  in Royal Caribbean Cruises on July 9, 2022 and sell it today you would lose (22.00)  from holding Royal Caribbean Cruises or give up 0.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Royal Caribbean Cruises  vs.  Nike Inc

 Performance (%) 
       Timeline  
Royal Caribbean Cruises 
Royal Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Cruises are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Royal Caribbean revealed solid returns over the last few months and may actually be approaching a breakup point.

Royal Price Channel

Nike Inc 
Nike Performance
0 of 100
Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Nike Price Channel

Royal Caribbean and Nike Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Royal Caribbean and Nike

The main advantage of trading using opposite Royal Caribbean and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Caribbean position performs unexpectedly, Nike 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 Nike will offset losses from the drop in Nike's long position.
Royal Caribbean vs. Amazon Inc
The idea behind Royal Caribbean Cruises and Nike Inc 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.
Nike vs. Amazon Inc
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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