Correlation Between Arconic and Carpenter Technology

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

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

Diversification Opportunities for Arconic and Carpenter Technology

0.47

Correlation Coefficient

Arconic  Carpenter Technology

Very weak diversification

The 3 months correlation between Arconic and Carpenter is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Arconic and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and Arconic 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 Arconic 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 Arconic i.e., Arconic and Carpenter Technology go up and down completely randomly.

Pair Corralation between Arconic and Carpenter Technology

If you would invest  18,102  in Carpenter Technology on October 12, 2024 and sell it today you would earn a total of  283.00  from holding Carpenter Technology or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

Arconic  vs.  Carpenter Technology

Arconic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arconic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Arconic is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of comparatively unfluctuating basic indicators, Carpenter Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arconic and Carpenter Technology

The main advantage of trading using opposite Arconic and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arconic 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 Arconic 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.