Correlation Between Carnival and Welltower

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

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

Diversification Opportunities for Carnival and Welltower

-0.04

Correlation Coefficient

Carnival  Welltower

Good diversification

The 3 months correlation between Carnival and Welltower is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Carnival and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower 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 Welltower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welltower has no effect on the direction of Carnival i.e., Carnival and Welltower go up and down completely randomly.

Pair Corralation between Carnival and Welltower

Considering the 90-day investment horizon Carnival is expected to under-perform the Welltower. In addition to that, Carnival is 2.31 times more volatile than Welltower. It trades about -0.22 of its total potential returns per unit of risk. Welltower is currently generating about -0.13 per unit of volatility. If you would invest  9,366  in Welltower on January 19, 2024 and sell it today you would lose (285.00) from holding Welltower or give up 3.04% of portfolio value over 90 days.

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

Carnival  vs.  Welltower

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 fragile 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.

Welltower

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Welltower is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Carnival and Welltower

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

The idea behind Carnival and Welltower 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.