Correlation Between Carnival Plc and Shimano

Can any of the company-specific risk be diversified away by investing in both Carnival Plc and Shimano 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 Shimano into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carnival plc and Shimano, you can compare the effects of market volatilities on Carnival Plc and Shimano 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 Shimano. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnival Plc and Shimano.

Diversification Opportunities for Carnival Plc and Shimano

-0.91

Correlation Coefficient

Carnival Plc  Shimano

Pay attention - limited upside

The 3 months correlation between Carnival and Shimano is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Carnival plc and Shimano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano 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 are associated (or correlated) with Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano has no effect on the direction of Carnival Plc i.e., Carnival Plc and Shimano go up and down completely randomly.

Pair Corralation between Carnival Plc and Shimano

Assuming the 90 days trading horizon Carnival plc is expected to generate 2.1 times more return on investment than Shimano. However, Carnival Plc is 2.1 times more volatile than Shimano. It trades about 0.15 of its potential returns per unit of risk. Shimano is currently generating about -0.17 per unit of risk. If you would invest  2,400  in Carnival plc on September 24, 2024 and sell it today you would earn a total of  180.00  from holding Carnival plc or generate 7.5% return on investment over 90 days.

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

Carnival plc  vs.  Shimano

Carnival plc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival plc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Carnival Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Shimano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shimano has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Carnival Plc and Shimano

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

The idea behind Carnival plc and Shimano 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.