Correlation Between Carnival and Lindblad Expeditions

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

By analyzing existing cross correlation between Carnival and Lindblad Expeditions Holdings, you can compare the effects of market volatilities on Carnival and Lindblad Expeditions 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 Lindblad Expeditions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnival and Lindblad Expeditions.

Diversification Opportunities for Carnival and Lindblad Expeditions

0.64

Correlation Coefficient

Carnival  Lindblad Expeditions

Poor diversification

The 3 months correlation between Carnival and Lindblad is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Carnival and Lindblad Expeditions Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindblad Expeditions 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 Lindblad Expeditions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindblad Expeditions has no effect on the direction of Carnival i.e., Carnival and Lindblad Expeditions go up and down completely randomly.

Pair Corralation between Carnival and Lindblad Expeditions

Considering the 90-day investment horizon Carnival is expected to generate 0.73 times more return on investment than Lindblad Expeditions. However, Carnival is 1.37 times less risky than Lindblad Expeditions. It trades about -0.26 of its potential returns per unit of risk. Lindblad Expeditions Holdings is currently generating about -0.24 per unit of risk. If you would invest  1,711  in Carnival on January 25, 2024 and sell it today you would lose (223.00) from holding Carnival or give up 13.03% of portfolio value over 90 days.

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

Carnival  vs.  Lindblad Expeditions Holdings

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 latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Lindblad Expeditions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lindblad Expeditions Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Carnival and Lindblad Expeditions

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

The idea behind Carnival and Lindblad Expeditions Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.