Correlation Between Carnival Industrial and Tah Tong

Can any of the company-specific risk be diversified away by investing in both Carnival Industrial and Tah Tong 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 Tah Tong 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 Tah Tong Textile, you can compare the effects of market volatilities on Carnival Industrial and Tah Tong 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 Tah Tong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnival Industrial and Tah Tong.

Diversification Opportunities for Carnival Industrial and Tah Tong

0.44

Correlation Coefficient

Carnival Industrial  Tah Tong

Very weak diversification

The 3 months correlation between Carnival and Tah is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Industrial Corp and Tah Tong Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tah Tong 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 Tah Tong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tah Tong Textile has no effect on the direction of Carnival Industrial i.e., Carnival Industrial and Tah Tong go up and down completely randomly.

Pair Corralation between Carnival Industrial and Tah Tong

Assuming the 90 days trading horizon Carnival Industrial Corp is expected to generate 0.69 times more return on investment than Tah Tong. However, Carnival Industrial Corp is 1.44 times less risky than Tah Tong. It trades about -0.06 of its potential returns per unit of risk. Tah Tong Textile is currently generating about -0.04 per unit of risk. If you would invest  983.00  in Carnival Industrial Corp on December 22, 2024 and sell it today you would lose (42.00) from holding Carnival Industrial Corp or give up 4.27% of portfolio value over 90 days.

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

Carnival Industrial Corp  vs.  Tah Tong Textile

Carnival Industrial Corp

Risk-Adjusted Performance

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.

Tah Tong Textile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tah Tong Textile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tah Tong 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 Carnival Industrial and Tah Tong

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

The idea behind Carnival Industrial Corp and Tah Tong 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.