Correlation Between Carnival Plc and Unity Software

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

By analyzing existing cross correlation between Carnival plc and Unity Software, you can compare the effects of market volatilities on Carnival Plc and Unity Software 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 Plc with a short position of Unity Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnival Plc and Unity Software.

Diversification Opportunities for Carnival Plc and Unity Software

0.71

Correlation Coefficient

Carnival Plc  Unity Software

Poor diversification

The 3 months correlation between Carnival and Unity is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Carnival plc and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software and Carnival Plc 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 plc are associated (or correlated) with Unity Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Software has no effect on the direction of Carnival Plc i.e., Carnival Plc and Unity Software go up and down completely randomly.

Pair Corralation between Carnival Plc and Unity Software

Assuming the 90 days trading horizon Carnival plc is expected to generate 0.66 times more return on investment than Unity Software. However, Carnival plc is 1.52 times less risky than Unity Software. It trades about 0.29 of its potential returns per unit of risk. Unity Software is currently generating about 0.08 per unit of risk. If you would invest  10,113  in Carnival plc on September 25, 2024 and sell it today you would earn a total of  6,266  from holding Carnival plc or generate 61.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Carnival plc  vs.  Unity Software

Carnival plc

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival plc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Carnival Plc sustained solid returns over the last few months and may actually be approaching a breakup point.

Unity Software

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Unity Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carnival Plc and Unity Software

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

The idea behind Carnival plc and Unity Software 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.