Correlation Between Carpenter Technology and Tomra Systems

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

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

Diversification Opportunities for Carpenter Technology and Tomra Systems

0.22

Correlation Coefficient

Carpenter Technology  Tomra Systems

Modest diversification

The 3 months correlation between Carpenter and Tomra is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Tomra Systems ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tomra Systems ASA 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 Tomra Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tomra Systems ASA has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Tomra Systems go up and down completely randomly.

Pair Corralation between Carpenter Technology and Tomra Systems

Considering the 90-day investment horizon Carpenter Technology is expected to generate 0.97 times more return on investment than Tomra Systems. However, Carpenter Technology is 1.03 times less risky than Tomra Systems. It trades about 0.05 of its potential returns per unit of risk. Tomra Systems ASA is currently generating about 0.03 per unit of risk. If you would invest  19,457  in Carpenter Technology on December 2, 2024 and sell it today you would earn a total of  1,250  from holding Carpenter Technology or generate 6.42% 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.  Tomra Systems ASA

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.

Tomra Systems ASA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tomra Systems ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tomra Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carpenter Technology and Tomra Systems

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

The idea behind Carpenter Technology and Tomra Systems ASA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.