Correlation Between Carpenter Technology and ESAB Corp
Can any of the company-specific risk be diversified away by investing in both Carpenter Technology and ESAB Corp 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 ESAB Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carpenter Technology and ESAB Corp, you can compare the effects of market volatilities on Carpenter Technology and ESAB Corp 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 ESAB Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carpenter Technology and ESAB Corp.
Diversification Opportunities for Carpenter Technology and ESAB Corp
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Carpenter and ESAB is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and ESAB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESAB Corp 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 ESAB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESAB Corp has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and ESAB Corp go up and down completely randomly.
Pair Corralation between Carpenter Technology and ESAB Corp
Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.12 times less return on investment than ESAB Corp. In addition to that, Carpenter Technology is 1.13 times more volatile than ESAB Corp. It trades about 0.15 of its total potential returns per unit of risk. ESAB Corp is currently generating about 0.18 per unit of volatility. If you would invest 10,511 in ESAB Corp on August 26, 2024 and sell it today you would earn a total of 2,243 from holding ESAB Corp or generate 21.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carpenter Technology vs. ESAB Corp
Performance |
| Timeline |
| Carpenter Technology |
| ESAB Corp |
Carpenter Technology and ESAB Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carpenter Technology and ESAB Corp
The main advantage of trading using opposite Carpenter Technology and ESAB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carpenter Technology position performs unexpectedly, ESAB Corp 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 ESAB Corp will offset losses from the drop in ESAB Corp's long position.| Carpenter Technology vs. Haynes International | Carpenter Technology vs. Worthington Industries | Carpenter Technology vs. Ryerson Holding Corp | Carpenter Technology vs. Mueller Industries |
| ESAB Corp vs. Dave Warrants | ESAB Corp vs. Evolv Technologies Holdings | ESAB Corp vs. Aquagold International | ESAB Corp vs. Morningstar Unconstrained Allocation |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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