Correlation Between Carnival Plc and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both Carnival Plc and STMICROELECTRONICS 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 STMICROELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carnival plc and STMICROELECTRONICS, you can compare the effects of market volatilities on Carnival Plc and STMICROELECTRONICS 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 STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnival Plc and STMICROELECTRONICS.
Diversification Opportunities for Carnival Plc and STMICROELECTRONICS
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Carnival and STMICROELECTRONICS is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Carnival plc and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of Carnival Plc i.e., Carnival Plc and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between Carnival Plc and STMICROELECTRONICS
Assuming the 90 days trading horizon Carnival plc is expected to generate 0.95 times more return on investment than STMICROELECTRONICS. However, Carnival plc is 1.06 times less risky than STMICROELECTRONICS. It trades about 0.22 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.15 per unit of risk. If you would invest 2,367 in Carnival plc on November 4, 2024 and sell it today you would earn a total of 301.00 from holding Carnival plc or generate 12.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carnival plc vs. STMICROELECTRONICS
Performance |
| Timeline |
| Carnival plc |
| STMICROELECTRONICS |
Carnival Plc and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carnival Plc and STMICROELECTRONICS
The main advantage of trading using opposite Carnival Plc and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnival Plc position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.| Carnival Plc vs. H2O Retailing | Carnival Plc vs. SCANSOURCE | Carnival Plc vs. SOEDER SPORTFISKE AB | Carnival Plc vs. Burlington Stores |
| STMICROELECTRONICS vs. Cal Maine Foods | STMICROELECTRONICS vs. GWILLI FOOD | STMICROELECTRONICS vs. SYSTEMAIR AB | STMICROELECTRONICS vs. Air New Zealand |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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