Correlation Between Carnival Plc and Wynn Resorts

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

Diversification Opportunities for Carnival Plc and Wynn Resorts

-0.39

Correlation Coefficient

Carnival Plc  Wynn Resorts

Very good diversification

The 3 months correlation between Carnival and Wynn is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Plc ADS and Wynn Resorts Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wynn Resorts Limited 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 Wynn Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wynn Resorts Limited has no effect on the direction of Carnival Plc i.e., Carnival Plc and Wynn Resorts go up and down completely randomly.

Pair Corralation between Carnival Plc and Wynn Resorts

Considering the 90-day investment horizon Carnival Plc ADS is expected to generate 1.48 times more return on investment than Wynn Resorts. However, Carnival Plc is 1.48 times more volatile than Wynn Resorts Limited. It trades about 0.07 of its potential returns per unit of risk. Wynn Resorts Limited is currently generating about -0.01 per unit of risk. If you would invest  1,084  in Carnival Plc ADS on October 24, 2024 and sell it today you would earn a total of  1,214  from holding Carnival Plc ADS or generate 111.99% return on investment over 90 days.

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

Carnival Plc ADS  vs.  Wynn Resorts Limited

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.

Wynn Resorts Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wynn Resorts Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic 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 Wynn Resorts

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

The idea behind Carnival Plc ADS and Wynn Resorts Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.