Correlation Between Carnival Industrial and Reward Wool

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

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

Diversification Opportunities for Carnival Industrial and Reward Wool

0.89

Correlation Coefficient

Carnival Industrial  Reward Wool

Very poor diversification

The 3 months correlation between Carnival and Reward is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Industrial Corp and Reward Wool Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reward Wool Industry and Carnival Industrial 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 Carnival Industrial Corp are associated (or correlated) with Reward Wool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reward Wool Industry has no effect on the direction of Carnival Industrial i.e., Carnival Industrial and Reward Wool go up and down completely randomly.

Pair Corralation between Carnival Industrial and Reward Wool

Assuming the 90 days trading horizon Carnival Industrial Corp is expected to under-perform the Reward Wool. But the stock apears to be less risky and, when comparing its historical volatility, Carnival Industrial Corp is 10.27 times less risky than Reward Wool. The stock trades about -0.11 of its potential returns per unit of risk. The Reward Wool Industry is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,805  in Reward Wool Industry on September 16, 2024 and sell it today you would earn a total of  115.00  from holding Reward Wool Industry or generate 3.02% return on investment over 90 days.

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

Carnival Industrial Corp  vs.  Reward Wool Industry

Carnival Industrial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnival Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carnival Industrial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Reward Wool Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reward Wool Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Carnival Industrial and Reward Wool

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

The idea behind Carnival Industrial Corp and Reward Wool Industry 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.