Correlation Between Carlisle Companies and Advanced Drainage

Can any of the company-specific risk be diversified away by investing in both Carlisle Companies and Advanced Drainage 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 Advanced Drainage 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 Advanced Drainage Systems, you can compare the effects of market volatilities on Carlisle Companies and Advanced Drainage 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 Advanced Drainage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlisle Companies and Advanced Drainage.

Diversification Opportunities for Carlisle Companies and Advanced Drainage

0.62

Correlation Coefficient

Carlisle Companies  Advanced Drainage

Poor diversification

The 3 months correlation between Carlisle and Advanced is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Carlisle Companies Incorporate and Advanced Drainage Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Drainage Systems 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 Advanced Drainage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Drainage Systems has no effect on the direction of Carlisle Companies i.e., Carlisle Companies and Advanced Drainage go up and down completely randomly.

Pair Corralation between Carlisle Companies and Advanced Drainage

Considering the 90-day investment horizon Carlisle Companies Incorporated is expected to generate 0.71 times more return on investment than Advanced Drainage. However, Carlisle Companies Incorporated is 1.4 times less risky than Advanced Drainage. It trades about 0.06 of its potential returns per unit of risk. Advanced Drainage Systems is currently generating about 0.04 per unit of risk. If you would invest  23,253  in Carlisle Companies Incorporated on September 28, 2024 and sell it today you would earn a total of  14,568  from holding Carlisle Companies Incorporated or generate 62.65% return on investment over 90 days.

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

Carlisle Companies Incorporate  vs.  Advanced Drainage Systems

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.

Advanced Drainage Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Drainage Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Carlisle Companies and Advanced Drainage

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

The idea behind Carlisle Companies Incorporated and Advanced Drainage Systems 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.