Correlation Between Cedar Fair and Carnival Plc

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

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

Diversification Opportunities for Cedar Fair and Carnival Plc

0.66

Correlation Coefficient

Cedar Fair  Carnival Plc

Poor diversification

The 3 months correlation between Cedar and Carnival is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cedar Fair LP and Carnival Plc ADS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival Plc ADS and Cedar Fair 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 Cedar Fair LP are associated (or correlated) with Carnival Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival Plc ADS has no effect on the direction of Cedar Fair i.e., Cedar Fair and Carnival Plc go up and down completely randomly.

Pair Corralation between Cedar Fair and Carnival Plc

Considering the 90-day investment horizon Cedar Fair LP is expected to under-perform the Carnival Plc. But the stock apears to be less risky and, when comparing its historical volatility, Cedar Fair LP is 1.54 times less risky than Carnival Plc. The stock trades about -0.29 of its potential returns per unit of risk. The Carnival Plc ADS is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,462  in Carnival Plc ADS on February 1, 2024 and sell it today you would lose (91.00) from holding Carnival Plc ADS or give up 6.22% of portfolio value over 90 days.

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

Cedar Fair LP  vs.  Carnival Plc ADS

Cedar Fair LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cedar Fair LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cedar Fair is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Carnival Plc ADS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnival Plc ADS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Cedar Fair and Carnival Plc

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

The idea behind Cedar Fair LP and Carnival Plc ADS 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.