Correlation Between CenterPoint Energy and CARPENTER

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

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

Diversification Opportunities for CenterPoint Energy and CARPENTER

-0.02

Correlation Coefficient

CenterPoint Energy  CARPENTER

Good diversification

The 3 months correlation between CenterPoint and CARPENTER is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and CARPENTER TECHNOLOGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARPENTER TECHNOLOGY and CenterPoint Energy 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 CenterPoint Energy are associated (or correlated) with CARPENTER. 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 CenterPoint Energy i.e., CenterPoint Energy and CARPENTER go up and down completely randomly.

Pair Corralation between CenterPoint Energy and CARPENTER

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 2.9 times more return on investment than CARPENTER. However, CenterPoint Energy is 2.9 times more volatile than CARPENTER TECHNOLOGY P. It trades about 0.06 of its potential returns per unit of risk. CARPENTER TECHNOLOGY P is currently generating about 0.01 per unit of risk. If you would invest  2,688  in CenterPoint Energy on October 9, 2024 and sell it today you would earn a total of  399.00  from holding CenterPoint Energy or generate 14.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.92%
Values	Daily Returns

CenterPoint Energy  vs.  CARPENTER TECHNOLOGY P

CenterPoint Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CenterPoint Energy and CARPENTER

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

The idea behind CenterPoint Energy and CARPENTER TECHNOLOGY P 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.