Correlation Between PLAY2CHILL and Carpenter Technology

Can any of the company-specific risk be diversified away by investing in both PLAY2CHILL 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 PLAY2CHILL and Carpenter Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PLAY2CHILL SA ZY and Carpenter Technology, you can compare the effects of market volatilities on PLAY2CHILL 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 PLAY2CHILL with a short position of Carpenter Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAY2CHILL and Carpenter Technology.

Diversification Opportunities for PLAY2CHILL and Carpenter Technology

0.46

Correlation Coefficient

PLAY2CHILL  Carpenter Technology

Very weak diversification

The 3 months correlation between PLAY2CHILL and Carpenter is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding PLAY2CHILL SA ZY and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and PLAY2CHILL 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 PLAY2CHILL SA ZY 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 PLAY2CHILL i.e., PLAY2CHILL and Carpenter Technology go up and down completely randomly.

Pair Corralation between PLAY2CHILL and Carpenter Technology

Assuming the 90 days horizon PLAY2CHILL SA ZY is expected to under-perform the Carpenter Technology. But the stock apears to be less risky and, when comparing its historical volatility, PLAY2CHILL SA ZY is 1.31 times less risky than Carpenter Technology. The stock trades about -0.37 of its potential returns per unit of risk. The Carpenter Technology is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  18,200  in Carpenter Technology on October 9, 2024 and sell it today you would lose (1,200) from holding Carpenter Technology or give up 6.59% of portfolio value over 90 days.

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

PLAY2CHILL SA ZY  vs.  Carpenter Technology

PLAY2CHILL SA ZY

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PLAY2CHILL SA ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PLAY2CHILL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Carpenter Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Carpenter Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PLAY2CHILL and Carpenter Technology

The main advantage of trading using opposite PLAY2CHILL and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLAY2CHILL 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.

The idea behind PLAY2CHILL SA ZY and Carpenter Technology 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.