Correlation Between Carnival Plc and Vulcan Materials

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

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

Diversification Opportunities for Carnival Plc and Vulcan Materials

0.91

Correlation Coefficient

Carnival Plc  Vulcan Materials

Almost no diversification

The 3 months correlation between Carnival and Vulcan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Carnival plc and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Carnival Plc i.e., Carnival Plc and Vulcan Materials go up and down completely randomly.

Pair Corralation between Carnival Plc and Vulcan Materials

Assuming the 90 days trading horizon Carnival plc is expected to generate 1.77 times more return on investment than Vulcan Materials. However, Carnival Plc is 1.77 times more volatile than Vulcan Materials. It trades about 0.08 of its potential returns per unit of risk. Vulcan Materials is currently generating about 0.07 per unit of risk. If you would invest  5,420  in Carnival plc on October 5, 2024 and sell it today you would earn a total of  10,036  from holding Carnival plc or generate 185.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.99%
Values	Daily Returns

Carnival plc  vs.  Vulcan Materials

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.

Vulcan Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Vulcan Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carnival Plc and Vulcan Materials

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

The idea behind Carnival plc and Vulcan Materials 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.