Correlation Between AZZ Incorporated and Carpenter Technology
Can any of the company-specific risk be diversified away by investing in both AZZ Incorporated and Carpenter Technology 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 AZZ Incorporated and Carpenter Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AZZ Incorporated and Carpenter Technology, you can compare the effects of market volatilities on AZZ Incorporated and Carpenter Technology 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 AZZ Incorporated with a short position of Carpenter Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of AZZ Incorporated and Carpenter Technology.
Diversification Opportunities for AZZ Incorporated and Carpenter Technology
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AZZ and Carpenter is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AZZ Incorporated and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and AZZ Incorporated 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 AZZ Incorporated are associated (or correlated) with Carpenter Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carpenter Technology has no effect on the direction of AZZ Incorporated i.e., AZZ Incorporated and Carpenter Technology go up and down completely randomly.
Pair Corralation between AZZ Incorporated and Carpenter Technology
Considering the 90-day investment horizon AZZ Incorporated is expected to generate 3.94 times less return on investment than Carpenter Technology. But when comparing it to its historical volatility, AZZ Incorporated is 1.22 times less risky than Carpenter Technology. It trades about 0.05 of its potential returns per unit of risk. Carpenter Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 10,911 in Carpenter Technology on September 1, 2024 and sell it today you would earn a total of 8,493 from holding Carpenter Technology or generate 77.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AZZ Incorporated vs. Carpenter Technology
Performance |
| Timeline |
| AZZ Incorporated |
| Carpenter Technology |
AZZ Incorporated and Carpenter Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AZZ Incorporated and Carpenter Technology
The main advantage of trading using opposite AZZ Incorporated and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AZZ Incorporated position performs unexpectedly, Carpenter Technology 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 Carpenter Technology will offset losses from the drop in Carpenter Technology's long position.| AZZ Incorporated vs. Maximus | AZZ Incorporated vs. ABM Industries Incorporated | AZZ Incorporated vs. CBIZ Inc | AZZ Incorporated vs. Cass Information Systems |
| Carpenter Technology vs. Worthington Industries | Carpenter Technology vs. Ryerson Holding Corp | Carpenter Technology vs. Mueller Industries | Carpenter Technology vs. Allegheny Technologies Incorporated |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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