Correlation Between Carpenter Technology and TGI Solar

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

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

Diversification Opportunities for Carpenter Technology and TGI Solar

-0.74

Correlation Coefficient

Carpenter Technology  TGI Solar

Pay attention - limited upside

The 3 months correlation between Carpenter and TGI is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and TGI Solar Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGI Solar Power 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 TGI Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGI Solar Power has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and TGI Solar go up and down completely randomly.

Pair Corralation between Carpenter Technology and TGI Solar

Considering the 90-day investment horizon Carpenter Technology is expected to under-perform the TGI Solar. But the stock apears to be less risky and, when comparing its historical volatility, Carpenter Technology is 7.59 times less risky than TGI Solar. The stock trades about -0.06 of its potential returns per unit of risk. The TGI Solar Power is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.08  in TGI Solar Power on September 17, 2024 and sell it today you would lose (0.01) from holding TGI Solar Power or give up 12.5% of portfolio value over 90 days.

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

Carpenter Technology  vs.  TGI Solar Power

Carpenter Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 10 (%) 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.

TGI Solar Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TGI Solar Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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 TGI Solar

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

The idea behind Carpenter Technology and TGI Solar Power 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.