Correlation Between Basic Materials and Carnival Plc
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Carnival Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Carnival plc, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Carnival Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Carnival Plc.
Diversification Opportunities for Basic Materials and Carnival Plc
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Basic and Carnival is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Carnival plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival plc and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Carnival Plc go up and down completely randomly.
Pair Corralation between Basic Materials and Carnival Plc
Assuming the 90 days trading horizon Basic Materials is expected to generate 21.52 times less return on investment than Carnival Plc. But when comparing it to its historical volatility, Basic Materials is 2.61 times less risky than Carnival Plc. It trades about 0.01 of its potential returns per unit of risk. Carnival plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 8,926 in Carnival plc on September 3, 2024 and sell it today you would earn a total of 6,958 from holding Carnival plc or generate 77.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Basic Materials vs. Carnival plc
Performance |
| Timeline |
Basic Materials and Carnival Plc Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Carnival plc
Pair trading matchups for Carnival Plc
Pair Trading with Basic Materials and Carnival Plc
The main advantage of trading using opposite Basic Materials and Carnival Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. G2D Investments | Basic Materials vs. Take Two Interactive Software | Basic Materials vs. Dell Technologies | Basic Materials vs. Brpr Corporate Offices |
| Carnival Plc vs. Booking Holdings | Carnival Plc vs. Royal Caribbean Cruises | Carnival Plc vs. Expedia Group | Carnival Plc vs. Norwegian Cruise Line |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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