Correlation Between Carnival and Sabre

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

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

Diversification Opportunities for Carnival and Sabre

0.0

Correlation Coefficient

Carnival  Sabre

Pay attention - limited upside

The 3 months correlation between Carnival and Sabre is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Carnival and Sabre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabre 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 Sabre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabre has no effect on the direction of Carnival i.e., Carnival and Sabre go up and down completely randomly.

Pair Corralation between Carnival and Sabre

Considering the 90-day investment horizon Carnival is expected to generate 0.74 times more return on investment than Sabre. However, Carnival is 1.35 times less risky than Sabre. It trades about 0.07 of its potential returns per unit of risk. Sabre is currently generating about -0.06 per unit of risk. If you would invest  1,088  in Carnival on October 7, 2024 and sell it today you would earn a total of  1,350  from holding Carnival or generate 124.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	26.21%
Values	Daily Returns

Carnival  vs.  Sabre

Carnival

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival are ranked lower than 16 (%) 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.

Sabre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Sabre is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Carnival and Sabre

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

The idea behind Carnival and Sabre 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.