Correlation Between Sabre and Carnival

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

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

Diversification Opportunities for Sabre and Carnival

-0.6

Correlation Coefficient

Sabre  Carnival

Excellent diversification

The 3 months correlation between Sabre and Carnival is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sabre and Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival and Sabre 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 Sabre are associated (or correlated) with Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival has no effect on the direction of Sabre i.e., Sabre and Carnival go up and down completely randomly.

Pair Corralation between Sabre and Carnival

If you would invest  2,573  in Carnival on October 22, 2024 and sell it today you would earn a total of  12.00  from holding Carnival or generate 0.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	5.26%
Values	Daily Returns

Sabre  vs.  Carnival

Sabre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Sabre is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Carnival

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Carnival disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabre and Carnival

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

The idea behind Sabre and Carnival 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.