Correlation Between Sphere Entertainment and Caravelle International

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

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

Diversification Opportunities for Sphere Entertainment and Caravelle International

0.43

Correlation Coefficient

Sphere Entertainment  Caravelle International

Very weak diversification

The 3 months correlation between Sphere and Caravelle is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Caravelle International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravelle International and Sphere Entertainment 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 Sphere Entertainment Co are associated (or correlated) with Caravelle International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravelle International has no effect on the direction of Sphere Entertainment i.e., Sphere Entertainment and Caravelle International go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Caravelle International

Given the investment horizon of 90 days Sphere Entertainment is expected to generate 9.67 times less return on investment than Caravelle International. But when comparing it to its historical volatility, Sphere Entertainment Co is 4.15 times less risky than Caravelle International. It trades about 0.05 of its potential returns per unit of risk. Caravelle International Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  184.00  in Caravelle International Group on December 1, 2024 and sell it today you would earn a total of  115.00  from holding Caravelle International Group or generate 62.5% return on investment over 90 days.

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

Sphere Entertainment Co  vs.  Caravelle International Group

Sphere Entertainment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sphere Entertainment Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Sphere Entertainment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Caravelle International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caravelle International Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Caravelle International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sphere Entertainment and Caravelle International

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

The idea behind Sphere Entertainment Co and Caravelle International Group 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.