Correlation Between Carpenter Technology and Quanex Building

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

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

Diversification Opportunities for Carpenter Technology and Quanex Building

-0.25

Correlation Coefficient

Carpenter Technology  Quanex Building

Very good diversification

The 3 months correlation between Carpenter and Quanex is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products 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 Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Quanex Building go up and down completely randomly.

Pair Corralation between Carpenter Technology and Quanex Building

Considering the 90-day investment horizon Carpenter Technology is expected to generate 0.94 times more return on investment than Quanex Building. However, Carpenter Technology is 1.07 times less risky than Quanex Building. It trades about 0.03 of its potential returns per unit of risk. Quanex Building Products is currently generating about -0.21 per unit of risk. If you would invest  19,385  in Carpenter Technology on November 28, 2024 and sell it today you would earn a total of  577.00  from holding Carpenter Technology or generate 2.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Carpenter Technology  vs.  Quanex Building Products

Carpenter Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carpenter Technology is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Quanex Building Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quanex Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Carpenter Technology and Quanex Building

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

The idea behind Carpenter Technology and Quanex Building Products 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.