Correlation Between Mueller Industries and Carpenter Technology
Can any of the company-specific risk be diversified away by investing in both Mueller Industries 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 Mueller Industries and Carpenter Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mueller Industries and Carpenter Technology, you can compare the effects of market volatilities on Mueller Industries 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 Mueller Industries with a short position of Carpenter Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mueller Industries and Carpenter Technology.
Diversification Opportunities for Mueller Industries and Carpenter Technology
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mueller and Carpenter is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Industries and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and Mueller Industries 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 Mueller Industries 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 Mueller Industries i.e., Mueller Industries and Carpenter Technology go up and down completely randomly.
Pair Corralation between Mueller Industries and Carpenter Technology
Considering the 90-day investment horizon Mueller Industries is expected to under-perform the Carpenter Technology. But the stock apears to be less risky and, when comparing its historical volatility, Mueller Industries is 1.28 times less risky than Carpenter Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Carpenter Technology is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 6,855 in Carpenter Technology on January 19, 2024 and sell it today you would earn a total of 921.00 from holding Carpenter Technology or generate 13.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Mueller Industries vs. Carpenter Technology
Performance |
| Timeline |
| Mueller Industries |
| Carpenter Technology |
Mueller Industries and Carpenter Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mueller Industries and Carpenter Technology
The main advantage of trading using opposite Mueller Industries and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mueller Industries 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.| Mueller Industries vs. Haynes International | Mueller Industries vs. Mayville Engineering Co | Mueller Industries vs. Gulf Island Fabrication | Mueller Industries vs. ESAB Corp |
| Carpenter Technology vs. Ampco Pittsburgh | Carpenter Technology vs. ESAB Corp | Carpenter Technology vs. Mayville Engineering Co | Carpenter Technology vs. Mueller Industries |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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