Correlation Between Carnival Plc and Yamaha Corp

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

Diversification Opportunities for Carnival Plc and Yamaha Corp

-0.86

Correlation Coefficient

Carnival Plc  Yamaha Corp

Pay attention - limited upside

The 3 months correlation between Carnival and Yamaha is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Plc ADS and Yamaha Corp DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha Corp DRC 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 Yamaha Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha Corp DRC has no effect on the direction of Carnival Plc i.e., Carnival Plc and Yamaha Corp go up and down completely randomly.

Pair Corralation between Carnival Plc and Yamaha Corp

Considering the 90-day investment horizon Carnival Plc ADS is expected to generate 1.18 times more return on investment than Yamaha Corp. However, Carnival Plc is 1.18 times more volatile than Yamaha Corp DRC. It trades about 0.09 of its potential returns per unit of risk. Yamaha Corp DRC is currently generating about 0.0 per unit of risk. If you would invest  1,311  in Carnival Plc ADS on September 14, 2024 and sell it today you would earn a total of  1,040  from holding Carnival Plc ADS or generate 79.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

Carnival Plc ADS  vs.  Yamaha Corp DRC

Carnival Plc ADS

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival Plc ADS are ranked lower than 21 (%) 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.

Yamaha Corp DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha Corp DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Carnival Plc and Yamaha Corp

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

The idea behind Carnival Plc ADS and Yamaha Corp DRC 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.