Correlation Between Carrier GlobalCorp and Compagnie

Can any of the company-specific risk be diversified away by investing in both Carrier GlobalCorp and Compagnie 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 Carrier GlobalCorp and Compagnie into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carrier GlobalCorp and Compagnie de Saint Gobain, you can compare the effects of market volatilities on Carrier GlobalCorp and Compagnie 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 Carrier GlobalCorp with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carrier GlobalCorp and Compagnie.

Diversification Opportunities for Carrier GlobalCorp and Compagnie

0.37

Correlation Coefficient

Carrier GlobalCorp  Compagnie

Weak diversification

The 3 months correlation between Carrier and Compagnie is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Carrier GlobalCorp and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and Carrier GlobalCorp 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 Carrier GlobalCorp are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Carrier GlobalCorp i.e., Carrier GlobalCorp and Compagnie go up and down completely randomly.

Pair Corralation between Carrier GlobalCorp and Compagnie

Given the investment horizon of 90 days Carrier GlobalCorp is expected to under-perform the Compagnie. In addition to that, Carrier GlobalCorp is 1.27 times more volatile than Compagnie de Saint Gobain. It trades about -0.02 of its total potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.11 per unit of volatility. If you would invest  1,372  in Compagnie de Saint Gobain on January 24, 2024 and sell it today you would earn a total of  122.00  from holding Compagnie de Saint Gobain or generate 8.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Carrier GlobalCorp  vs.  Compagnie de Saint Gobain

Carrier GlobalCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrier GlobalCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Carrier GlobalCorp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Compagnie de Saint

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Carrier GlobalCorp and Compagnie

The main advantage of trading using opposite Carrier GlobalCorp and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carrier GlobalCorp position performs unexpectedly, Compagnie 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 Compagnie will offset losses from the drop in Compagnie's long position.

The idea behind Carrier GlobalCorp and Compagnie de Saint Gobain pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.