Correlation Between Carpenter Technology and Vitalhub Corp

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

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

Diversification Opportunities for Carpenter Technology and Vitalhub Corp

0.82

Correlation Coefficient

Carpenter Technology  Vitalhub Corp

Very poor diversification

The 3 months correlation between Carpenter and Vitalhub is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Vitalhub Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitalhub Corp 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 Vitalhub Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitalhub Corp has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Vitalhub Corp go up and down completely randomly.

Pair Corralation between Carpenter Technology and Vitalhub Corp

Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.24 times more return on investment than Vitalhub Corp. However, Carpenter Technology is 1.24 times more volatile than Vitalhub Corp. It trades about 0.14 of its potential returns per unit of risk. Vitalhub Corp is currently generating about 0.17 per unit of risk. If you would invest  14,119  in Carpenter Technology on September 14, 2024 and sell it today you would earn a total of  3,290  from holding Carpenter Technology or generate 23.3% return on investment over 90 days.

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

Carpenter Technology  vs.  Vitalhub Corp

Carpenter Technology

Risk-Adjusted Performance

10 of 100

Good

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.

Vitalhub Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vitalhub Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental drivers, Vitalhub Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carpenter Technology and Vitalhub Corp

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

The idea behind Carpenter Technology and Vitalhub Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.