Correlation Between Sportsquest and Carnival Plc

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

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

Diversification Opportunities for Sportsquest and Carnival Plc

-0.68

Correlation Coefficient

Sportsquest  Carnival Plc

Excellent diversification

The 3 months correlation between Sportsquest and Carnival is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sportsquest 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 Sportsquest 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 Sportsquest 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 Sportsquest i.e., Sportsquest and Carnival Plc go up and down completely randomly.

Pair Corralation between Sportsquest and Carnival Plc

Given the investment horizon of 90 days Sportsquest is expected to generate 14.66 times more return on investment than Carnival Plc. However, Sportsquest is 14.66 times more volatile than Carnival Plc ADS. It trades about 0.03 of its potential returns per unit of risk. Carnival Plc ADS is currently generating about 0.16 per unit of risk. If you would invest  0.03  in Sportsquest on September 18, 2024 and sell it today you would lose (0.01) from holding Sportsquest or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Sportsquest  vs.  Carnival Plc ADS

Sportsquest

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sportsquest are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Sportsquest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Carnival Plc ADS

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival Plc ADS are ranked lower than 19 (%) 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 Sportsquest and Carnival Plc

The main advantage of trading using opposite Sportsquest and Carnival Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sportsquest 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 Sportsquest 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.