Correlation Between Carnival Plc and Flight Centre
Can any of the company-specific risk be diversified away by investing in both Carnival Plc and Flight Centre 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 Plc and Flight Centre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carnival plc and Flight Centre Travel, you can compare the effects of market volatilities on Carnival Plc and Flight Centre 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 Plc with a short position of Flight Centre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnival Plc and Flight Centre.
Diversification Opportunities for Carnival Plc and Flight Centre
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Carnival and Flight is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Carnival plc and Flight Centre Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flight Centre Travel and Carnival Plc 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 plc are associated (or correlated) with Flight Centre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flight Centre Travel has no effect on the direction of Carnival Plc i.e., Carnival Plc and Flight Centre go up and down completely randomly.
Pair Corralation between Carnival Plc and Flight Centre
Assuming the 90 days trading horizon Carnival plc is expected to generate 1.46 times more return on investment than Flight Centre. However, Carnival Plc is 1.46 times more volatile than Flight Centre Travel. It trades about 0.08 of its potential returns per unit of risk. Flight Centre Travel is currently generating about 0.03 per unit of risk. If you would invest 850.00 in Carnival plc on August 30, 2024 and sell it today you would earn a total of 1,539 from holding Carnival plc or generate 181.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carnival plc vs. Flight Centre Travel
Performance |
| Timeline |
| Carnival plc |
| Flight Centre Travel |
Carnival Plc and Flight Centre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carnival Plc and Flight Centre
The main advantage of trading using opposite Carnival Plc and Flight Centre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnival Plc position performs unexpectedly, Flight Centre 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 Flight Centre will offset losses from the drop in Flight Centre's long position.| Carnival Plc vs. Superior Plus Corp | Carnival Plc vs. NMI Holdings | Carnival Plc vs. SIVERS SEMICONDUCTORS AB | Carnival Plc vs. Talanx AG |
| Flight Centre vs. Aedas Homes SA | Flight Centre vs. Haverty Furniture Companies | Flight Centre vs. WILLIS LEASE FIN | Flight Centre vs. UNITED RENTALS |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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