Correlation Between Carnival Plc and Li Ning

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

Diversification Opportunities for Carnival Plc and Li Ning

0.01

Correlation Coefficient

Carnival Plc  Li Ning

Significant diversification

The 3 months correlation between Carnival and LNNGF is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Plc ADS and Li Ning Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning Company 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 Li Ning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Ning Company has no effect on the direction of Carnival Plc i.e., Carnival Plc and Li Ning go up and down completely randomly.

Pair Corralation between Carnival Plc and Li Ning

If you would invest  2,283  in Carnival Plc ADS on October 20, 2024 and sell it today you would earn a total of  56.00  from holding Carnival Plc ADS or generate 2.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Carnival Plc ADS  vs.  Li Ning Company

Carnival Plc ADS

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival Plc ADS are ranked lower than 11 (%) 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.

Li Ning Company

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Li Ning is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carnival Plc and Li Ning

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

The idea behind Carnival Plc ADS and Li Ning Company 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 Global Correlations module to find global opportunities by holding instruments from different markets.