Correlation Between Carnival and Bloomin Brands

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

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

Diversification Opportunities for Carnival and Bloomin Brands

-0.83

Correlation Coefficient

Carnival  Bloomin Brands

Pay attention - limited upside

The 3 months correlation between Carnival and Bloomin is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Carnival and Bloomin Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloomin Brands and Carnival 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 are associated (or correlated) with Bloomin Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloomin Brands has no effect on the direction of Carnival i.e., Carnival and Bloomin Brands go up and down completely randomly.

Pair Corralation between Carnival and Bloomin Brands

Considering the 90-day investment horizon Carnival is expected to generate 0.67 times more return on investment than Bloomin Brands. However, Carnival is 1.48 times less risky than Bloomin Brands. It trades about 0.12 of its potential returns per unit of risk. Bloomin Brands is currently generating about -0.05 per unit of risk. If you would invest  2,535  in Carnival on September 22, 2024 and sell it today you would earn a total of  145.00  from holding Carnival or generate 5.72% return on investment over 90 days.

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

Carnival  vs.  Bloomin Brands

Carnival

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Carnival disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bloomin Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Carnival and Bloomin Brands

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

The idea behind Carnival and Bloomin Brands 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.