Correlation Between CARPENTER and Via Renewables

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

By analyzing existing cross correlation between CARPENTER TECHNOLOGY P and Via Renewables, you can compare the effects of market volatilities on CARPENTER and Via Renewables 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 with a short position of Via Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARPENTER and Via Renewables.

Diversification Opportunities for CARPENTER and Via Renewables

-0.54

Correlation Coefficient

CARPENTER  Via Renewables

Excellent diversification

The 3 months correlation between CARPENTER and Via is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding CARPENTER TECHNOLOGY P and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables and CARPENTER 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 P are associated (or correlated) with Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of CARPENTER i.e., CARPENTER and Via Renewables go up and down completely randomly.

Pair Corralation between CARPENTER and Via Renewables

Assuming the 90 days trading horizon CARPENTER is expected to generate 147.35 times less return on investment than Via Renewables. In addition to that, CARPENTER is 1.21 times more volatile than Via Renewables. It trades about 0.0 of its total potential returns per unit of risk. Via Renewables is currently generating about 0.31 per unit of volatility. If you would invest  2,197  in Via Renewables on March 15, 2024 and sell it today you would earn a total of  138.00  from holding Via Renewables or generate 6.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

CARPENTER TECHNOLOGY P  vs.  Via Renewables

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARPENTER TECHNOLOGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARPENTER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Via Renewables

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Via Renewables reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CARPENTER and Via Renewables

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

The idea behind CARPENTER TECHNOLOGY P and Via Renewables 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.

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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.