Correlation Between Lily Textile and Carnival Industrial

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

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

Diversification Opportunities for Lily Textile and Carnival Industrial

0.77

Correlation Coefficient

Lily Textile  Carnival Industrial

Poor diversification

The 3 months correlation between Lily and Carnival is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lily Textile Co 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 Lily Textile 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 Lily Textile Co 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 Lily Textile i.e., Lily Textile and Carnival Industrial go up and down completely randomly.

Pair Corralation between Lily Textile and Carnival Industrial

Assuming the 90 days trading horizon Lily Textile Co is expected to under-perform the Carnival Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Lily Textile Co is 1.03 times less risky than Carnival Industrial. The stock trades about -0.22 of its potential returns per unit of risk. The Carnival Industrial Corp is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Carnival Industrial Corp on October 25, 2024 and sell it today you would lose (118.00) from holding Carnival Industrial Corp or give up 11.68% of portfolio value over 90 days.

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

Lily Textile Co  vs.  Carnival Industrial Corp

Lily Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lily Textile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture 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 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.

Pair Trading with Lily Textile and Carnival Industrial

The main advantage of trading using opposite Lily Textile and Carnival Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lily Textile 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 Lily Textile Co 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.