Correlation Between Rafael Holdings and Royal Caribbean

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

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

Diversification Opportunities for Rafael Holdings and Royal Caribbean

-0.62

Correlation Coefficient

Rafael Holdings  Royal Caribbean

Excellent diversification

The 3 months correlation between Rafael and Royal is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rafael Holdings Class 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 Rafael Holdings 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 Rafael Holdings Class 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 Rafael Holdings i.e., Rafael Holdings and Royal Caribbean go up and down completely randomly.

Pair Corralation between Rafael Holdings and Royal Caribbean

Considering the 90-day investment horizon Rafael Holdings Class is expected to generate 1.37 times more return on investment than Royal Caribbean. However, Rafael Holdings is 1.37 times more volatile than Royal Caribbean Cruises. It trades about 0.01 of its potential returns per unit of risk. Royal Caribbean Cruises is currently generating about 0.01 per unit of risk. If you would invest  171.00  in Rafael Holdings Class on January 26, 2024 and sell it today you would earn a total of  0.00  from holding Rafael Holdings Class or generate 0.0% return on investment over 90 days.

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

Rafael Holdings Class  vs.  Royal Caribbean Cruises

Rafael Holdings Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rafael Holdings Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Rafael Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Royal Caribbean Cruises

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Cruises are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Royal Caribbean may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Rafael Holdings and Royal Caribbean

The main advantage of trading using opposite Rafael Holdings and Royal Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rafael Holdings 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 Rafael Holdings Class 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.