Correlation Between WW International and Carnival

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

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

Diversification Opportunities for WW International and Carnival

0.39

Correlation Coefficient

WW International  Carnival

Weak diversification

The 3 months correlation between WW International and Carnival is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding WW International and Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival and WW International 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 WW International 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 WW International i.e., WW International and Carnival go up and down completely randomly.

Pair Corralation between WW International and Carnival

Allowing for the 90-day total investment horizon WW International is expected to generate 4.53 times more return on investment than Carnival. However, WW International is 4.53 times more volatile than Carnival. It trades about 0.09 of its potential returns per unit of risk. Carnival is currently generating about 0.22 per unit of risk. If you would invest  88.00  in WW International on September 28, 2024 and sell it today you would earn a total of  31.00  from holding WW International or generate 35.23% return on investment over 90 days.

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

WW International  vs.  Carnival

WW International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WW International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, WW International showed solid returns over the last few months and may actually be approaching a breakup point.

Carnival

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival are ranked lower than 17 (%) 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 WW International and Carnival

The main advantage of trading using opposite WW International and Carnival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW International 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 WW International 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.