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The correlations are visually obvious but the chart still does not do justice to the magnitude of the statistical relationship between the price of crude oil and stocks, particularly the cruise lines. The R Square for cruise stocks (CCL, RCL) versus crude prices and the S&P versus crude is 79% and 49%, respectively. Thus, changes in crude explain almost 80% and 50% of the moves in cruise stocks and the S&P, respectively. Moreover, the relationships are highly significant with T Stats off the charts. Kudlow is right. It’s all about oil.

Taking the analysis one step further, changes in crude and the S&P combined explain 90% of the moves in cruise stocks. So to be a hot cruise stock picker all you need to know is where oil and the market are heading. Seems easy enough, right?

Trading cruise stocks right now is a tricky game for your typical consumer analyst. It’s probably wise to stay away, unless you are an oil trader in which case you might as well trade the commodity. Yields don’t seem to matter right now but they will. Yields have held up nicely but I have some serious doubts about sustainability, particularly in on-board spend. More on that later. For now, I’d be patient unless you’re willing to hedge out oil and the market.


Crude driving cruise stocks and the S&P