Correlation Between BANDAI NAMCO and Carnival Plc

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

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

Diversification Opportunities for BANDAI NAMCO and Carnival Plc

-0.72

Correlation Coefficient

BANDAI NAMCO  Carnival Plc

Pay attention - limited upside

The 3 months correlation between BANDAI and Carnival is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding BANDAI NAMCO Holdings and Carnival Plc ADS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival Plc ADS and BANDAI NAMCO 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 BANDAI NAMCO Holdings 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 ADS has no effect on the direction of BANDAI NAMCO i.e., BANDAI NAMCO and Carnival Plc go up and down completely randomly.

Pair Corralation between BANDAI NAMCO and Carnival Plc

Assuming the 90 days horizon BANDAI NAMCO Holdings is expected to under-perform the Carnival Plc. But the pink sheet apears to be less risky and, when comparing its historical volatility, BANDAI NAMCO Holdings is 1.18 times less risky than Carnival Plc. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Carnival Plc ADS is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,604  in Carnival Plc ADS on September 14, 2024 and sell it today you would earn a total of  777.00  from holding Carnival Plc ADS or generate 48.44% return on investment over 90 days.

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

BANDAI NAMCO Holdings  vs.  Carnival Plc ADS

BANDAI NAMCO Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANDAI NAMCO Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, BANDAI NAMCO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with BANDAI NAMCO and Carnival Plc

The main advantage of trading using opposite BANDAI NAMCO and Carnival Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANDAI NAMCO 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 BANDAI NAMCO Holdings and Carnival Plc ADS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.