Correlation Between Carpenter Technology and Indo Tambangraya

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

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

Diversification Opportunities for Carpenter Technology and Indo Tambangraya

-0.02

Correlation Coefficient

Carpenter Technology  Indo Tambangraya

Good diversification

The 3 months correlation between Carpenter and Indo is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Indo Tambangraya Megah in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Tambangraya Megah 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 Indo Tambangraya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Tambangraya Megah has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Indo Tambangraya go up and down completely randomly.

Pair Corralation between Carpenter Technology and Indo Tambangraya

Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.0 times more return on investment than Indo Tambangraya. However, Carpenter Technology is 1.0 times more volatile than Indo Tambangraya Megah. It trades about 0.06 of its potential returns per unit of risk. Indo Tambangraya Megah is currently generating about -0.06 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 Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Carpenter Technology  vs.  Indo Tambangraya Megah

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.

Indo Tambangraya Megah

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indo Tambangraya Megah has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Carpenter Technology and Indo Tambangraya

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

The idea behind Carpenter Technology and Indo Tambangraya Megah 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.