Correlation Between MITSUBISHI KAKOKI and Carpenter Technology

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

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

Diversification Opportunities for MITSUBISHI KAKOKI and Carpenter Technology

-0.46

Correlation Coefficient

MITSUBISHI KAKOKI  Carpenter Technology

Very good diversification

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

Pair Corralation between MITSUBISHI KAKOKI and Carpenter Technology

Assuming the 90 days horizon MITSUBISHI KAKOKI is expected to generate 50.31 times less return on investment than Carpenter Technology. But when comparing it to its historical volatility, MITSUBISHI KAKOKI is 1.51 times less risky than Carpenter Technology. It trades about 0.0 of its potential returns per unit of risk. Carpenter Technology is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  9,821  in Carpenter Technology on October 7, 2024 and sell it today you would earn a total of  7,179  from holding Carpenter Technology or generate 73.1% return on investment over 90 days.

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

MITSUBISHI KAKOKI  vs.  Carpenter Technology

MITSUBISHI KAKOKI

Risk-Adjusted Performance

7 of 100

OK

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

Carpenter Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Carpenter Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MITSUBISHI KAKOKI and Carpenter Technology

The main advantage of trading using opposite MITSUBISHI KAKOKI and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MITSUBISHI KAKOKI 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 MITSUBISHI KAKOKI 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.