Correlation Between Carpenter Technology and Gulf Island

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

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

Diversification Opportunities for Carpenter Technology and Gulf Island

0.2

Correlation Coefficient

Carpenter Technology  Gulf Island

Modest diversification

The 3 months correlation between Carpenter and Gulf is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Gulf Island Fabrication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Island Fabrication and Carpenter Technology 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 Carpenter Technology are associated (or correlated) with Gulf Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Island Fabrication has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Gulf Island go up and down completely randomly.

Pair Corralation between Carpenter Technology and Gulf Island

Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.48 times more return on investment than Gulf Island. However, Carpenter Technology is 1.48 times more volatile than Gulf Island Fabrication. It trades about 0.06 of its potential returns per unit of risk. Gulf Island Fabrication is currently generating about -0.02 per unit of risk. If you would invest  16,715  in Carpenter Technology on December 29, 2024 and sell it today you would earn a total of  1,413  from holding Carpenter Technology or generate 8.45% return on investment over 90 days.

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

Carpenter Technology  vs.  Gulf Island Fabrication

Carpenter Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Carpenter Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Gulf Island Fabrication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gulf Island Fabrication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Gulf Island is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Carpenter Technology and Gulf Island

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

The idea behind Carpenter Technology and Gulf Island Fabrication 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.