Correlation Between Expedia and Carnival Plc

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

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

Diversification Opportunities for Expedia and Carnival Plc

0.97

Correlation Coefficient

Expedia  Carnival Plc

Almost no diversification

The 3 months correlation between Expedia and Carnival is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and Carnival plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival plc and Expedia 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 Expedia Group are associated (or correlated) with Carnival Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival plc has no effect on the direction of Expedia i.e., Expedia and Carnival Plc go up and down completely randomly.

Pair Corralation between Expedia and Carnival Plc

Assuming the 90 days trading horizon Expedia is expected to generate 1.53 times less return on investment than Carnival Plc. But when comparing it to its historical volatility, Expedia Group is 1.24 times less risky than Carnival Plc. It trades about 0.21 of its potential returns per unit of risk. Carnival plc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,669  in Carnival plc on September 24, 2024 and sell it today you would earn a total of  911.00  from holding Carnival plc or generate 54.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Expedia Group  vs.  Carnival plc

Expedia Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expedia Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Expedia reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Expedia and Carnival Plc

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

The idea behind Expedia Group and Carnival plc 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.