Correlation Between China International and Carpenter Technology
Can any of the company-specific risk be diversified away by investing in both China International 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 China International and Carpenter Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China International Marine and Carpenter Technology, you can compare the effects of market volatilities on China International 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 China International with a short position of Carpenter Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of China International and Carpenter Technology.
Diversification Opportunities for China International and Carpenter Technology
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Carpenter is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding China International Marine and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and China International 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 China International Marine 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 China International i.e., China International and Carpenter Technology go up and down completely randomly.
Pair Corralation between China International and Carpenter Technology
Assuming the 90 days horizon China International Marine is expected to generate 1.35 times more return on investment than Carpenter Technology. However, China International is 1.35 times more volatile than Carpenter Technology. It trades about -0.02 of its potential returns per unit of risk. Carpenter Technology is currently generating about -0.31 per unit of risk. If you would invest 63.00 in China International Marine on September 26, 2024 and sell it today you would lose (1.00) from holding China International Marine or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China International Marine vs. Carpenter Technology
Performance |
| Timeline |
| China International |
| Carpenter Technology |
China International and Carpenter Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China International and Carpenter Technology
The main advantage of trading using opposite China International and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China International 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.| China International vs. Allegheny Technologies Incorporated | China International vs. thyssenkrupp AG | China International vs. thyssenkrupp AG | China International vs. Mueller Industries |
| Carpenter Technology vs. Allegheny Technologies Incorporated | Carpenter Technology vs. China International Marine | Carpenter Technology vs. thyssenkrupp AG | Carpenter Technology vs. thyssenkrupp AG |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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