Correlation Between Carnival Industrial and Tung Ho

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

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

Diversification Opportunities for Carnival Industrial and Tung Ho

-0.62

Correlation Coefficient

Carnival Industrial  Tung Ho

Excellent diversification

The 3 months correlation between Carnival and Tung is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Industrial Corp and Tung Ho Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Textile and Carnival Industrial 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 Industrial Corp are associated (or correlated) with Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Textile has no effect on the direction of Carnival Industrial i.e., Carnival Industrial and Tung Ho go up and down completely randomly.

Pair Corralation between Carnival Industrial and Tung Ho

Assuming the 90 days trading horizon Carnival Industrial Corp is expected to under-perform the Tung Ho. But the stock apears to be less risky and, when comparing its historical volatility, Carnival Industrial Corp is 4.72 times less risky than Tung Ho. The stock trades about -0.53 of its potential returns per unit of risk. The Tung Ho Textile is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,360  in Tung Ho Textile on October 8, 2024 and sell it today you would earn a total of  125.00  from holding Tung Ho Textile or generate 5.3% return on investment over 90 days.

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

Carnival Industrial Corp  vs.  Tung Ho Textile

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Tung Ho Textile

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tung Ho Textile are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tung Ho may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Carnival Industrial and Tung Ho

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

The idea behind Carnival Industrial Corp and Tung Ho Textile 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.