Correlation Between Maryland Tax-free and CARPENTER

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

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

Diversification Opportunities for Maryland Tax-free and CARPENTER

0.6

Correlation Coefficient

Maryland Tax-free  CARPENTER

Poor diversification

The 3 months correlation between Maryland and CARPENTER is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Maryland Tax Free Bond and CARPENTER TECHNOLOGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARPENTER TECHNOLOGY and Maryland Tax-free 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 Maryland Tax Free Bond 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 Maryland Tax-free i.e., Maryland Tax-free and CARPENTER go up and down completely randomly.

Pair Corralation between Maryland Tax-free and CARPENTER

Assuming the 90 days horizon Maryland Tax Free Bond is expected to under-perform the CARPENTER. But the mutual fund apears to be less risky and, when comparing its historical volatility, Maryland Tax Free Bond is 1.31 times less risky than CARPENTER. The mutual fund trades about -0.34 of its potential returns per unit of risk. The CARPENTER TECHNOLOGY P is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  10,060  in CARPENTER TECHNOLOGY P on October 9, 2024 and sell it today you would lose (80.00) from holding CARPENTER TECHNOLOGY P or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Maryland Tax Free Bond  vs.  CARPENTER TECHNOLOGY P

Maryland Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maryland Tax Free Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Maryland Tax-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Maryland Tax-free and CARPENTER

The main advantage of trading using opposite Maryland Tax-free and CARPENTER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maryland Tax-free 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 Maryland Tax Free Bond 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.