Correlation Between Ross Stores and Carpenter Technology
Can any of the company-specific risk be diversified away by investing in both Ross Stores and Carpenter Technology 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 Ross Stores and Carpenter Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Carpenter Technology, you can compare the effects of market volatilities on Ross Stores and Carpenter Technology 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 Ross Stores with a short position of Carpenter Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Carpenter Technology.
Diversification Opportunities for Ross Stores and Carpenter Technology
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ross and Carpenter is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and Ross Stores 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 Ross Stores are associated (or correlated) with Carpenter Technology. 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 Ross Stores i.e., Ross Stores and Carpenter Technology go up and down completely randomly.
Pair Corralation between Ross Stores and Carpenter Technology
Assuming the 90 days trading horizon Ross Stores is expected to generate 1.38 times less return on investment than Carpenter Technology. But when comparing it to its historical volatility, Ross Stores is 1.53 times less risky than Carpenter Technology. It trades about 0.13 of its potential returns per unit of risk. Carpenter Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 14,780 in Carpenter Technology on October 10, 2024 and sell it today you would earn a total of 2,820 from holding Carpenter Technology or generate 19.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Ross Stores vs. Carpenter Technology
Performance |
Timeline |
Ross Stores |
Carpenter Technology |
Ross Stores and Carpenter Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ross Stores and Carpenter Technology
The main advantage of trading using opposite Ross Stores and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, Carpenter Technology 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 Technology will offset losses from the drop in Carpenter Technology's long position.Ross Stores vs. Apple Inc | Ross Stores vs. Apple Inc | Ross Stores vs. Apple Inc | Ross Stores vs. Apple Inc |
Carpenter Technology vs. Transport International Holdings | Carpenter Technology vs. Hochschild Mining plc | Carpenter Technology vs. QINGCI GAMES INC | Carpenter Technology vs. DETALION GAMES SA |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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