Correlation Between Smart Share and Carnival Plc

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

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

Diversification Opportunities for Smart Share and Carnival Plc

-0.14

Correlation Coefficient

Smart Share  Carnival Plc

Good diversification

The 3 months correlation between Smart and Carnival is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global 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 Smart Share 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 Smart Share Global 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 Smart Share i.e., Smart Share and Carnival Plc go up and down completely randomly.

Pair Corralation between Smart Share and Carnival Plc

Allowing for the 90-day total investment horizon Smart Share Global is expected to under-perform the Carnival Plc. In addition to that, Smart Share is 1.67 times more volatile than Carnival Plc ADS. It trades about -0.01 of its total potential returns per unit of risk. Carnival Plc ADS is currently generating about 0.11 per unit of volatility. If you would invest  1,617  in Carnival Plc ADS on September 30, 2024 and sell it today you would earn a total of  648.00  from holding Carnival Plc ADS or generate 40.07% return on investment over 90 days.

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

Smart Share Global  vs.  Carnival Plc ADS

Smart Share Global

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Smart Share is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Carnival Plc ADS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival Plc ADS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Carnival Plc disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smart Share and Carnival Plc

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

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.