Correlation Between Carnival Plc and Portillos

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

Diversification Opportunities for Carnival Plc and Portillos

-0.65

Correlation Coefficient

Carnival Plc  Portillos

Excellent diversification

The 3 months correlation between Carnival and Portillos is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Plc ADS and Portillos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portillos 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 Portillos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portillos has no effect on the direction of Carnival Plc i.e., Carnival Plc and Portillos go up and down completely randomly.

Pair Corralation between Carnival Plc and Portillos

Considering the 90-day investment horizon Carnival Plc ADS is expected to generate 0.64 times more return on investment than Portillos. However, Carnival Plc ADS is 1.57 times less risky than Portillos. It trades about 0.15 of its potential returns per unit of risk. Portillos is currently generating about -0.04 per unit of risk. If you would invest  1,909  in Carnival Plc ADS on October 24, 2024 and sell it today you would earn a total of  386.50  from holding Carnival Plc ADS or generate 20.25% return on investment over 90 days.

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

Carnival Plc ADS  vs.  Portillos

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.

Portillos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Portillos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Carnival Plc and Portillos

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

The idea behind Carnival Plc ADS and Portillos 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.