Correlation Between GM and Royal Caribbean
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Royal Caribbean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Royal Caribbean Cruises, you can compare the effects of market volatilities on GM 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 GM with a short position of Royal Caribbean. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Royal Caribbean.
Diversification Opportunities for GM and Royal Caribbean
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and Royal is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Royal Caribbean go up and down completely randomly.
Pair Corralation between GM and Royal Caribbean
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.89 times more return on investment than Royal Caribbean. However, General Motors is 1.12 times less risky than Royal Caribbean. It trades about 0.24 of its potential returns per unit of risk. Royal Caribbean Cruises is currently generating about -0.05 per unit of risk. If you would invest 5,807 in General Motors on October 6, 2025 and sell it today you would earn a total of 2,291 from holding General Motors or generate 39.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Royal Caribbean Cruises
Performance |
| Timeline |
| General Motors |
| Royal Caribbean Cruises |
GM and Royal Caribbean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Royal Caribbean
The main advantage of trading using opposite GM and Royal Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Royal Caribbean vs. Airbnb Inc | Royal Caribbean vs. Marriott International | Royal Caribbean vs. OReilly Automotive | Royal Caribbean vs. Trip Group Ltd |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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