Correlation Between Carnival Plc and Parks America

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

Diversification Opportunities for Carnival Plc and Parks America

0.29

Correlation Coefficient

Carnival Plc  Parks America

Modest diversification

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

Pair Corralation between Carnival Plc and Parks America

Considering the 90-day investment horizon Carnival Plc ADS is expected to generate 0.41 times more return on investment than Parks America. However, Carnival Plc ADS is 2.47 times less risky than Parks America. It trades about 0.17 of its potential returns per unit of risk. Parks America is currently generating about -0.01 per unit of risk. If you would invest  2,225  in Carnival Plc ADS on September 18, 2024 and sell it today you would earn a total of  130.00  from holding Carnival Plc ADS or generate 5.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Carnival Plc ADS  vs.  Parks America

Carnival Plc ADS

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival Plc ADS are ranked lower than 19 (%) 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.

Parks America

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parks America are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Parks America is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Carnival Plc and Parks America

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

The idea behind Carnival Plc ADS and Parks America 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.