Correlation Between Carpenter Technology and Kubota

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

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

Diversification Opportunities for Carpenter Technology and Kubota

-0.76

Correlation Coefficient

Carpenter Technology  Kubota

Pay attention - limited upside

The 3 months correlation between Carpenter and Kubota is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Kubota in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kubota 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 Kubota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kubota has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Kubota go up and down completely randomly.

Pair Corralation between Carpenter Technology and Kubota

Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.6 times more return on investment than Kubota. However, Carpenter Technology is 1.6 times more volatile than Kubota. It trades about -0.1 of its potential returns per unit of risk. Kubota is currently generating about -0.16 per unit of risk. If you would invest  17,921  in Carpenter Technology on September 18, 2024 and sell it today you would lose (861.00) from holding Carpenter Technology or give up 4.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Carpenter Technology  vs.  Kubota

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.

Kubota

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kubota has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Carpenter Technology and Kubota

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

The idea behind Carpenter Technology and Kubota 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.