Correlation Between Associated British and Carnival PLC
Can any of the company-specific risk be diversified away by investing in both Associated British and Carnival PLC 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 Associated British and Carnival PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Carnival PLC, you can compare the effects of market volatilities on Associated British and Carnival PLC 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 Associated British with a short position of Carnival PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Carnival PLC.
Diversification Opportunities for Associated British and Carnival PLC
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Associated and Carnival is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Carnival PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival PLC and Associated British 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 Associated British Foods are associated (or correlated) with Carnival PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival PLC has no effect on the direction of Associated British i.e., Associated British and Carnival PLC go up and down completely randomly.
Pair Corralation between Associated British and Carnival PLC
Assuming the 90 days trading horizon Associated British is expected to generate 2.95 times less return on investment than Carnival PLC. But when comparing it to its historical volatility, Associated British Foods is 2.22 times less risky than Carnival PLC. It trades about 0.07 of its potential returns per unit of risk. Carnival PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 62,040 in Carnival PLC on September 5, 2024 and sell it today you would earn a total of 124,610 from holding Carnival PLC or generate 200.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Carnival PLC
Performance |
| Timeline |
| Associated British Foods |
| Carnival PLC |
Associated British and Carnival PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Carnival PLC
The main advantage of trading using opposite Associated British and Carnival PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Carnival PLC 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 Carnival PLC will offset losses from the drop in Carnival PLC's long position.| Associated British vs. Samsung Electronics Co | Associated British vs. Samsung Electronics Co | Associated British vs. Hyundai Motor | Associated British vs. Toyota Motor Corp |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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