Correlation Between Carnival Industrial and Louisa Professional
Can any of the company-specific risk be diversified away by investing in both Carnival Industrial and Louisa Professional 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 Carnival Industrial and Louisa Professional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carnival Industrial Corp and Louisa Professional Coffee, you can compare the effects of market volatilities on Carnival Industrial and Louisa Professional 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 Carnival Industrial with a short position of Louisa Professional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnival Industrial and Louisa Professional.
Diversification Opportunities for Carnival Industrial and Louisa Professional
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carnival and Louisa is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Industrial Corp and Louisa Professional Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Louisa Professional and Carnival Industrial 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 Carnival Industrial Corp are associated (or correlated) with Louisa Professional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Louisa Professional has no effect on the direction of Carnival Industrial i.e., Carnival Industrial and Louisa Professional go up and down completely randomly.
Pair Corralation between Carnival Industrial and Louisa Professional
Assuming the 90 days trading horizon Carnival Industrial Corp is expected to under-perform the Louisa Professional. But the stock apears to be less risky and, when comparing its historical volatility, Carnival Industrial Corp is 3.39 times less risky than Louisa Professional. The stock trades about -0.49 of its potential returns per unit of risk. The Louisa Professional Coffee is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 9,430 in Louisa Professional Coffee on October 11, 2024 and sell it today you would lose (80.00) from holding Louisa Professional Coffee or give up 0.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Carnival Industrial Corp vs. Louisa Professional Coffee
Performance |
| Timeline |
| Carnival Industrial Corp |
| Louisa Professional |
Carnival Industrial and Louisa Professional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carnival Industrial and Louisa Professional
The main advantage of trading using opposite Carnival Industrial and Louisa Professional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnival Industrial position performs unexpectedly, Louisa Professional 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 Louisa Professional will offset losses from the drop in Louisa Professional's long position.| Carnival Industrial vs. Grand Plastic Technology | Carnival Industrial vs. CKM Building Material | Carnival Industrial vs. Yonyu Plastics Co | Carnival Industrial vs. Formosan Rubber Group |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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