Correlation Between Carnival Plc and Focusrite Plc

Can any of the company-specific risk be diversified away by investing in both Carnival Plc and Focusrite 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 Carnival Plc and Focusrite Plc 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 Focusrite plc, you can compare the effects of market volatilities on Carnival Plc and Focusrite 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 Carnival Plc with a short position of Focusrite Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnival Plc and Focusrite Plc.

Diversification Opportunities for Carnival Plc and Focusrite Plc

-0.45

Correlation Coefficient

Carnival Plc  Focusrite Plc

Very good diversification

The 3 months correlation between Carnival and Focusrite is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Plc ADS and Focusrite plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focusrite plc 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 Focusrite Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focusrite plc has no effect on the direction of Carnival Plc i.e., Carnival Plc and Focusrite Plc go up and down completely randomly.

Pair Corralation between Carnival Plc and Focusrite Plc

Considering the 90-day investment horizon Carnival Plc ADS is expected to generate 1.39 times more return on investment than Focusrite Plc. However, Carnival Plc is 1.39 times more volatile than Focusrite plc. It trades about 0.08 of its potential returns per unit of risk. Focusrite plc is currently generating about -0.06 per unit of risk. If you would invest  843.00  in Carnival Plc ADS on September 28, 2024 and sell it today you would earn a total of  1,478  from holding Carnival Plc ADS or generate 175.33% 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.  Focusrite plc

Carnival Plc ADS

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival Plc ADS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Carnival Plc disclosed solid returns over the last few months and may actually be approaching a breakup point.

Focusrite plc

Risk-Adjusted Performance

10 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Focusrite plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Focusrite Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carnival Plc and Focusrite Plc

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

The idea behind Carnival Plc ADS and Focusrite 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.