Correlation Between SCOTT TECHNOLOGY and Carnival Plc

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

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

Diversification Opportunities for SCOTT TECHNOLOGY and Carnival Plc

0.81

Correlation Coefficient

SCOTT TECHNOLOGY  Carnival Plc

Very poor diversification

The 3 months correlation between SCOTT and Carnival is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and Carnival plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival plc and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and Carnival Plc go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and Carnival Plc

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to generate 0.68 times more return on investment than Carnival Plc. However, SCOTT TECHNOLOGY is 1.46 times less risky than Carnival Plc. It trades about -0.18 of its potential returns per unit of risk. Carnival plc is currently generating about -0.12 per unit of risk. If you would invest  125.00  in SCOTT TECHNOLOGY on December 22, 2024 and sell it today you would lose (25.00) from holding SCOTT TECHNOLOGY or give up 20.0% of portfolio value over 90 days.

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

SCOTT TECHNOLOGY  vs.  Carnival plc

SCOTT TECHNOLOGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCOTT TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Carnival plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carnival plc 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 fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SCOTT TECHNOLOGY and Carnival Plc

The main advantage of trading using opposite SCOTT TECHNOLOGY and Carnival Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.