Correlation Between Arconic and Carpenter Technology
Can any of the company-specific risk be diversified away by investing in both Arconic 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 Arconic and Carpenter Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arconic and Carpenter Technology, you can compare the effects of market volatilities on Arconic 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 Arconic with a short position of Carpenter Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arconic and Carpenter Technology.
Diversification Opportunities for Arconic and Carpenter Technology
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arconic and Carpenter is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Arconic and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and Arconic 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 Arconic 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 Arconic i.e., Arconic and Carpenter Technology go up and down completely randomly.
Pair Corralation between Arconic and Carpenter Technology
If you would invest 6,778 in Carpenter Technology on January 20, 2024 and sell it today you would earn a total of 1,160 from holding Carpenter Technology or generate 17.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.35% |
| Values | Daily Returns |
Arconic vs. Carpenter Technology
Performance |
| Timeline |
| Arconic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Carpenter Technology |
Arconic and Carpenter Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arconic and Carpenter Technology
The main advantage of trading using opposite Arconic and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arconic 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.| Arconic vs. Carpenter Technology | Arconic vs. Haynes International | Arconic vs. Worthington Industries | Arconic vs. Ryerson Holding Corp |
| Carpenter Technology vs. Northwest Pipe | Carpenter Technology vs. Insteel Industries | Carpenter Technology vs. ESAB Corp | Carpenter Technology vs. Gulf Island Fabrication |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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