Correlation Between Masco and Carlisle Companies

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

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

Diversification Opportunities for Masco and Carlisle Companies

0.56

Correlation Coefficient

Masco  Carlisle Companies

Very weak diversification

The 3 months correlation between Masco and Carlisle is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Masco and Carlisle Companies Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlisle Companies and Masco 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 Masco are associated (or correlated) with Carlisle Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlisle Companies has no effect on the direction of Masco i.e., Masco and Carlisle Companies go up and down completely randomly.

Pair Corralation between Masco and Carlisle Companies

Considering the 90-day investment horizon Masco is expected to generate 0.77 times more return on investment than Carlisle Companies. However, Masco is 1.3 times less risky than Carlisle Companies. It trades about -0.02 of its potential returns per unit of risk. Carlisle Companies Incorporated is currently generating about -0.03 per unit of risk. If you would invest  7,223  in Masco on December 28, 2024 and sell it today you would lose (177.00) from holding Masco or give up 2.45% of portfolio value over 90 days.

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

Masco  vs.  Carlisle Companies Incorporate

Masco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Masco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Masco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Carlisle Companies

Risk-Adjusted Performance

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 quite persistent basic indicators, Carlisle Companies is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Masco and Carlisle Companies

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

The idea behind Masco and Carlisle Companies Incorporated 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.