Correlation Between Apple and Carnival

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

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

Diversification Opportunities for Apple and Carnival

0.15

Correlation Coefficient

Apple  Carnival

Average diversification

The 3 months correlation between Apple and Carnival is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival and Apple 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 Apple Inc 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 Apple i.e., Apple and Carnival go up and down completely randomly.

Pair Corralation between Apple and Carnival

Given the investment horizon of 90 days Apple Inc is expected to generate 0.69 times more return on investment than Carnival. However, Apple Inc is 1.44 times less risky than Carnival. It trades about -0.01 of its potential returns per unit of risk. Carnival is currently generating about -0.27 per unit of risk. If you would invest  17,372  in Apple Inc on January 17, 2024 and sell it today you would lose (103.00) from holding Apple Inc or give up 0.59% of portfolio value over 90 days.

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

Apple Inc  vs.  Carnival

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Apple is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Carnival

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnival has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Apple and Carnival

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

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.