Correlation Between Carnival Plc and Yamaha

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

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

Diversification Opportunities for Carnival Plc and Yamaha

-0.86

Correlation Coefficient

Carnival Plc  Yamaha

Pay attention - limited upside

The 3 months correlation between Carnival and Yamaha is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Carnival plc and Yamaha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha and Carnival Plc 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 plc are associated (or correlated) with Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha has no effect on the direction of Carnival Plc i.e., Carnival Plc and Yamaha go up and down completely randomly.

Pair Corralation between Carnival Plc and Yamaha

Assuming the 90 days trading horizon Carnival Plc is expected to generate 2.32 times less return on investment than Yamaha. In addition to that, Carnival Plc is 1.36 times more volatile than Yamaha. It trades about 0.02 of its total potential returns per unit of risk. Yamaha is currently generating about 0.07 per unit of volatility. If you would invest  673.00  in Yamaha on September 28, 2024 and sell it today you would earn a total of  17.00  from holding Yamaha or generate 2.53% return on investment over 90 days.

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

Carnival plc  vs.  Yamaha

Carnival plc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Carnival Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Yamaha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Carnival Plc and Yamaha

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

The idea behind Carnival plc and Yamaha 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.