Correlation Between Carlisle Companies and Armstrong World

Can any of the company-specific risk be diversified away by investing in both Carlisle Companies and Armstrong World 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 Carlisle Companies and Armstrong World into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carlisle Companies Incorporated and Armstrong World Industries, you can compare the effects of market volatilities on Carlisle Companies and Armstrong World 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 Carlisle Companies with a short position of Armstrong World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlisle Companies and Armstrong World.

Diversification Opportunities for Carlisle Companies and Armstrong World

-0.04

Correlation Coefficient

Carlisle Companies  Armstrong World

Good diversification

The 3 months correlation between Carlisle and Armstrong is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Carlisle Companies Incorporate and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu and Carlisle Companies 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 Carlisle Companies Incorporated are associated (or correlated) with Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of Carlisle Companies i.e., Carlisle Companies and Armstrong World go up and down completely randomly.

Pair Corralation between Carlisle Companies and Armstrong World

Considering the 90-day investment horizon Carlisle Companies Incorporated is expected to under-perform the Armstrong World. In addition to that, Carlisle Companies is 1.06 times more volatile than Armstrong World Industries. It trades about -0.74 of its total potential returns per unit of risk. Armstrong World Industries is currently generating about -0.43 per unit of volatility. If you would invest  16,201  in Armstrong World Industries on September 27, 2024 and sell it today you would lose (1,729) from holding Armstrong World Industries or give up 10.67% of portfolio value over 90 days.

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

Carlisle Companies Incorporate  vs.  Armstrong World Industries

Carlisle Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlisle Companies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Armstrong World Indu

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Armstrong World Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Armstrong World may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Carlisle Companies and Armstrong World

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

The idea behind Carlisle Companies Incorporated and Armstrong World Industries 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 Global Correlations module to find global opportunities by holding instruments from different markets.