Correlation Between Carnival Plc and Bright Horizons

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

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

Diversification Opportunities for Carnival Plc and Bright Horizons

-0.42

Correlation Coefficient

Carnival Plc  Bright Horizons

Very good diversification

The 3 months correlation between Carnival and Bright is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Plc ADS and Bright Horizons Family in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Horizons Family 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 ADS are associated (or correlated) with Bright Horizons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Horizons Family has no effect on the direction of Carnival Plc i.e., Carnival Plc and Bright Horizons go up and down completely randomly.

Pair Corralation between Carnival Plc and Bright Horizons

Considering the 90-day investment horizon Carnival Plc ADS is expected to under-perform the Bright Horizons. In addition to that, Carnival Plc is 1.47 times more volatile than Bright Horizons Family. It trades about -0.12 of its total potential returns per unit of risk. Bright Horizons Family is currently generating about 0.12 per unit of volatility. If you would invest  11,063  in Bright Horizons Family on December 29, 2024 and sell it today you would earn a total of  1,597  from holding Bright Horizons Family or generate 14.44% return on investment over 90 days.

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

Carnival Plc ADS  vs.  Bright Horizons Family

Carnival Plc ADS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carnival Plc ADS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bright Horizons Family

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Horizons Family are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Bright Horizons displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carnival Plc and Bright Horizons

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

The idea behind Carnival Plc ADS and Bright Horizons Family 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.