Correlation Between Carnival and DL Industries

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

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

Diversification Opportunities for Carnival and DL Industries

0.08

Correlation Coefficient

Carnival  DL Industries

Significant diversification

The 3 months correlation between Carnival and DLNDY is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Carnival and DL Industries ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DL Industries ADR and Carnival 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 are associated (or correlated) with DL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DL Industries ADR has no effect on the direction of Carnival i.e., Carnival and DL Industries go up and down completely randomly.

Pair Corralation between Carnival and DL Industries

Considering the 90-day investment horizon Carnival is expected to under-perform the DL Industries. But the stock apears to be less risky and, when comparing its historical volatility, Carnival is 1.24 times less risky than DL Industries. The stock trades about -0.36 of its potential returns per unit of risk. The DL Industries ADR is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  275.00  in DL Industries ADR on January 20, 2024 and sell it today you would lose (13.00) from holding DL Industries ADR or give up 4.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Carnival  vs.  DL Industries ADR

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.

DL Industries ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DL Industries ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Carnival and DL Industries

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

The idea behind Carnival and DL Industries ADR 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..