Correlation Between Carpenter Technology and Armstrong World
Can any of the company-specific risk be diversified away by investing in both Carpenter Technology and Armstrong World 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 Armstrong World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carpenter Technology and Armstrong World Industries, you can compare the effects of market volatilities on Carpenter Technology and Armstrong World 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 Armstrong World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carpenter Technology and Armstrong World.
Diversification Opportunities for Carpenter Technology and Armstrong World
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Carpenter and Armstrong is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu 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 Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Armstrong World go up and down completely randomly.
Pair Corralation between Carpenter Technology and Armstrong World
Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.73 times less return on investment than Armstrong World. In addition to that, Carpenter Technology is 2.23 times more volatile than Armstrong World Industries. It trades about 0.08 of its total potential returns per unit of risk. Armstrong World Industries is currently generating about 0.29 per unit of volatility. If you would invest 14,266 in Armstrong World Industries on November 9, 2024 and sell it today you would earn a total of 1,049 from holding Armstrong World Industries or generate 7.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carpenter Technology vs. Armstrong World Industries
Performance |
| Timeline |
| Carpenter Technology |
| Armstrong World Indu |
Carpenter Technology and Armstrong World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carpenter Technology and Armstrong World
The main advantage of trading using opposite Carpenter Technology and Armstrong World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carpenter Technology position performs unexpectedly, Armstrong World 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 Armstrong World will offset losses from the drop in Armstrong World's long position.| Carpenter Technology vs. Worthington Industries | Carpenter Technology vs. Ryerson Holding Corp | Carpenter Technology vs. Mueller Industries | Carpenter Technology vs. Allegheny Technologies Incorporated |
| Armstrong World vs. Quanex Building Products | Armstrong World vs. Gibraltar Industries | Armstrong World vs. Beacon Roofing Supply | Armstrong World vs. Janus International Group |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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