Correlation Between Carpenter Technology and Solar Integrated

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

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

Diversification Opportunities for Carpenter Technology and Solar Integrated

-0.25

Correlation Coefficient

Carpenter Technology  Solar Integrated

Very good diversification

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

Pair Corralation between Carpenter Technology and Solar Integrated

Considering the 90-day investment horizon Carpenter Technology is expected to generate 31.28 times less return on investment than Solar Integrated. But when comparing it to its historical volatility, Carpenter Technology is 15.75 times less risky than Solar Integrated. It trades about 0.08 of its potential returns per unit of risk. Solar Integrated Roofing is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Solar Integrated Roofing on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Solar Integrated Roofing or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Carpenter Technology  vs.  Solar Integrated Roofing

Carpenter Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 6 (%) 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.

Solar Integrated Roofing

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Integrated Roofing are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Solar Integrated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carpenter Technology and Solar Integrated

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

The idea behind Carpenter Technology and Solar Integrated Roofing 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.