Correlation Between Carrier Global and Kingspan Group

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

By analyzing existing cross correlation between Carrier Global and Kingspan Group plc, you can compare the effects of market volatilities on Carrier Global and Kingspan Group 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 Global with a short position of Kingspan Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carrier Global and Kingspan Group.

Diversification Opportunities for Carrier Global and Kingspan Group

0.4

Correlation Coefficient

Carrier Global  Kingspan Group

Very weak diversification

The 3 months correlation between Carrier and Kingspan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Carrier Global and Kingspan Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingspan Group plc and Carrier Global 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 Global are associated (or correlated) with Kingspan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingspan Group plc has no effect on the direction of Carrier Global i.e., Carrier Global and Kingspan Group go up and down completely randomly.

Pair Corralation between Carrier Global and Kingspan Group

Assuming the 90 days horizon Carrier Global is expected to generate 1.18 times more return on investment than Kingspan Group. However, Carrier Global is 1.18 times more volatile than Kingspan Group plc. It trades about 0.06 of its potential returns per unit of risk. Kingspan Group plc is currently generating about -0.07 per unit of risk. If you would invest  5,787  in Carrier Global on October 7, 2024 and sell it today you would earn a total of  873.00  from holding Carrier Global or generate 15.09% return on investment over 90 days.

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

Carrier Global  vs.  Kingspan Group plc

Carrier Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrier Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Kingspan Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingspan Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Carrier Global and Kingspan Group

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

The idea behind Carrier Global and Kingspan Group plc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.