Correlation Between Carpenter Technology and Allegheny Technologies
Can any of the company-specific risk be diversified away by investing in both Carpenter Technology and Allegheny Technologies 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 Allegheny Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carpenter Technology and Allegheny Technologies Incorporated, you can compare the effects of market volatilities on Carpenter Technology and Allegheny Technologies 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 Allegheny Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carpenter Technology and Allegheny Technologies.
Diversification Opportunities for Carpenter Technology and Allegheny Technologies
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carpenter and Allegheny is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies 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 Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Allegheny Technologies go up and down completely randomly.
Pair Corralation between Carpenter Technology and Allegheny Technologies
Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.37 times more return on investment than Allegheny Technologies. However, Carpenter Technology is 1.37 times more volatile than Allegheny Technologies Incorporated. It trades about 0.37 of its potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about -0.06 per unit of risk. If you would invest 6,830 in Carpenter Technology on January 26, 2024 and sell it today you would earn a total of 1,210 from holding Carpenter Technology or generate 17.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Carpenter Technology vs. Allegheny Technologies Incorpo
Performance |
Timeline |
Carpenter Technology |
Allegheny Technologies |
Carpenter Technology and Allegheny Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Carpenter Technology and Allegheny Technologies
The main advantage of trading using opposite Carpenter Technology and Allegheny Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carpenter Technology position performs unexpectedly, Allegheny Technologies 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 Allegheny Technologies will offset losses from the drop in Allegheny Technologies' long position.Carpenter Technology vs. Insteel Industries | Carpenter Technology vs. Mayville Engineering Co | Carpenter Technology vs. Gulf Island Fabrication | Carpenter Technology vs. ESAB Corp |
Allegheny Technologies vs. Insteel Industries | Allegheny Technologies vs. Mayville Engineering Co | Allegheny Technologies vs. Gulf Island Fabrication | Allegheny Technologies vs. ESAB Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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