Correlation Between Carnival Plc and Games Workshop

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

Diversification Opportunities for Carnival Plc and Games Workshop

0.67

Correlation Coefficient

Carnival Plc  Games Workshop

Poor diversification

The 3 months correlation between Carnival and Games is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Plc ADS and Games Workshop Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Games Workshop Group 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 Games Workshop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Games Workshop Group has no effect on the direction of Carnival Plc i.e., Carnival Plc and Games Workshop go up and down completely randomly.

Pair Corralation between Carnival Plc and Games Workshop

Considering the 90-day investment horizon Carnival Plc ADS is expected to generate 0.73 times more return on investment than Games Workshop. However, Carnival Plc ADS is 1.38 times less risky than Games Workshop. It trades about 0.16 of its potential returns per unit of risk. Games Workshop Group is currently generating about 0.01 per unit of risk. If you would invest  1,924  in Carnival Plc ADS on October 23, 2024 and sell it today you would earn a total of  415.00  from holding Carnival Plc ADS or generate 21.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Carnival Plc ADS  vs.  Games Workshop Group

Carnival Plc ADS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival Plc ADS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Carnival Plc disclosed solid returns over the last few months and may actually be approaching a breakup point.

Games Workshop Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Games Workshop Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Games Workshop is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carnival Plc and Games Workshop

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

The idea behind Carnival Plc ADS and Games Workshop Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.