Correlation Between Carpenter Technology and Arconic
Can any of the company-specific risk be diversified away by investing in both Carpenter Technology and Arconic 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 Carpenter Technology and Arconic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carpenter Technology and Arconic, you can compare the effects of market volatilities on Carpenter Technology and Arconic 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 Carpenter Technology with a short position of Arconic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carpenter Technology and Arconic.
Diversification Opportunities for Carpenter Technology and Arconic
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carpenter and Arconic is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Arconic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arconic and Carpenter Technology 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 Carpenter Technology are associated (or correlated) with Arconic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arconic has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Arconic go up and down completely randomly.
Pair Corralation between Carpenter Technology and Arconic
Considering the 90-day investment horizon Carpenter Technology is expected to generate 0.79 times more return on investment than Arconic. However, Carpenter Technology is 1.27 times less risky than Arconic. It trades about 0.14 of its potential returns per unit of risk. Arconic is currently generating about 0.08 per unit of risk. If you would invest 3,658 in Carpenter Technology on September 5, 2024 and sell it today you would earn a total of 15,612 from holding Carpenter Technology or generate 426.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 30.51% |
| Values | Daily Returns |
Carpenter Technology vs. Arconic
Performance |
| Timeline |
| Carpenter Technology |
| Arconic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Carpenter Technology and Arconic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carpenter Technology and Arconic
The main advantage of trading using opposite Carpenter Technology and Arconic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carpenter Technology position performs unexpectedly, Arconic 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 Arconic will offset losses from the drop in Arconic's long position.| Carpenter Technology vs. Northwest Pipe | Carpenter Technology vs. Insteel Industries | Carpenter Technology vs. ESAB Corp | Carpenter Technology vs. Gulf Island Fabrication |
| Arconic vs. Carpenter Technology | Arconic vs. Worthington Industries | Arconic vs. Ryerson Holding Corp | Arconic vs. Northwest Pipe |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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