Correlation Between Levi Strauss and CARPENTER

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

By analyzing existing cross correlation between Levi Strauss Co and CARPENTER TECHNOLOGY P, you can compare the effects of market volatilities on Levi Strauss and CARPENTER 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 Levi Strauss with a short position of CARPENTER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Levi Strauss and CARPENTER.

Diversification Opportunities for Levi Strauss and CARPENTER

0.32

Correlation Coefficient

Levi Strauss  CARPENTER

Weak diversification

The 3 months correlation between Levi and CARPENTER is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Levi Strauss Co and CARPENTER TECHNOLOGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARPENTER TECHNOLOGY and Levi Strauss 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 Levi Strauss Co are associated (or correlated) with CARPENTER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARPENTER TECHNOLOGY has no effect on the direction of Levi Strauss i.e., Levi Strauss and CARPENTER go up and down completely randomly.

Pair Corralation between Levi Strauss and CARPENTER

Given the investment horizon of 90 days Levi Strauss Co is expected to generate 3.83 times more return on investment than CARPENTER. However, Levi Strauss is 3.83 times more volatile than CARPENTER TECHNOLOGY P. It trades about 0.03 of its potential returns per unit of risk. CARPENTER TECHNOLOGY P is currently generating about -0.07 per unit of risk. If you would invest  1,755  in Levi Strauss Co on October 10, 2024 and sell it today you would earn a total of  12.00  from holding Levi Strauss Co or generate 0.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Levi Strauss Co  vs.  CARPENTER TECHNOLOGY P

Levi Strauss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Levi Strauss is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARPENTER TECHNOLOGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARPENTER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Levi Strauss and CARPENTER

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

The idea behind Levi Strauss Co and CARPENTER TECHNOLOGY P 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.