Correlation Between Uni President and Carnival Industrial

Can any of the company-specific risk be diversified away by investing in both Uni President and Carnival Industrial 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 Uni President and Carnival Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Uni President Enterprises Corp and Carnival Industrial Corp, you can compare the effects of market volatilities on Uni President and Carnival Industrial 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 Uni President with a short position of Carnival Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uni President and Carnival Industrial.

Diversification Opportunities for Uni President and Carnival Industrial

0.75

Correlation Coefficient

Uni President  Carnival Industrial

Poor diversification

The 3 months correlation between Uni and Carnival is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Uni President Enterprises Corp and Carnival Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival Industrial Corp and Uni President 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 Uni President Enterprises Corp are associated (or correlated) with Carnival Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival Industrial Corp has no effect on the direction of Uni President i.e., Uni President and Carnival Industrial go up and down completely randomly.

Pair Corralation between Uni President and Carnival Industrial

Assuming the 90 days trading horizon Uni President Enterprises Corp is expected to generate 0.89 times more return on investment than Carnival Industrial. However, Uni President Enterprises Corp is 1.12 times less risky than Carnival Industrial. It trades about 0.05 of its potential returns per unit of risk. Carnival Industrial Corp is currently generating about -0.05 per unit of risk. If you would invest  6,461  in Uni President Enterprises Corp on September 30, 2024 and sell it today you would earn a total of  1,819  from holding Uni President Enterprises Corp or generate 28.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Uni President Enterprises Corp  vs.  Carnival Industrial Corp

Uni President Enterp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uni President Enterprises Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Uni President is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Carnival Industrial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnival Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carnival Industrial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Uni President and Carnival Industrial

The main advantage of trading using opposite Uni President and Carnival Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uni President position performs unexpectedly, Carnival Industrial 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 Industrial will offset losses from the drop in Carnival Industrial's long position.

The idea behind Uni President Enterprises Corp and Carnival Industrial Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.