Correlation Between BII Railway and Carnival Plc

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

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

Diversification Opportunities for BII Railway and Carnival Plc

-0.29

Correlation Coefficient

BII Railway  Carnival Plc

Very good diversification

The 3 months correlation between BII and Carnival is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Carnival plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival plc and BII Railway 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 BII Railway Transportation are associated (or correlated) with Carnival Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival plc has no effect on the direction of BII Railway i.e., BII Railway and Carnival Plc go up and down completely randomly.

Pair Corralation between BII Railway and Carnival Plc

Assuming the 90 days horizon BII Railway is expected to generate 2.86 times less return on investment than Carnival Plc. In addition to that, BII Railway is 1.46 times more volatile than Carnival plc. It trades about 0.07 of its total potential returns per unit of risk. Carnival plc is currently generating about 0.28 per unit of volatility. If you would invest  1,601  in Carnival plc on September 16, 2024 and sell it today you would earn a total of  901.00  from holding Carnival plc or generate 56.28% return on investment over 90 days.

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

BII Railway Transportation  vs.  Carnival plc

BII Railway Transpor

Risk-Adjusted Performance

5 of 100

Modest

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

Carnival plc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival plc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Carnival Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BII Railway and Carnival Plc

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

The idea behind BII Railway Transportation and Carnival plc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.