Correlation Between Ryerson Holding and Carpenter Technology

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

By analyzing existing cross correlation between Ryerson Holding Corp and Carpenter Technology, you can compare the effects of market volatilities on Ryerson Holding 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 Ryerson Holding with a short position of Carpenter Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ryerson Holding and Carpenter Technology.

Diversification Opportunities for Ryerson Holding and Carpenter Technology

0.88

Correlation Coefficient

Ryerson Holding  Carpenter Technology

Very poor diversification

The 3 months correlation between Ryerson and Carpenter is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ryerson Holding Corp and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and Ryerson Holding 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 Ryerson Holding Corp 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 Ryerson Holding i.e., Ryerson Holding and Carpenter Technology go up and down completely randomly.

Pair Corralation between Ryerson Holding and Carpenter Technology

Considering the 90-day investment horizon Ryerson Holding is expected to generate 1.14 times less return on investment than Carpenter Technology. In addition to that, Ryerson Holding is 1.11 times more volatile than Carpenter Technology. It trades about 0.14 of its total potential returns per unit of risk. Carpenter Technology is currently generating about 0.18 per unit of volatility. If you would invest  14,459  in Carpenter Technology on August 30, 2024 and sell it today you would earn a total of  4,987  from holding Carpenter Technology or generate 34.49% return on investment over 90 days.

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

Ryerson Holding Corp  vs.  Carpenter Technology

Ryerson Holding Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryerson Holding Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Ryerson Holding demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Carpenter Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Carpenter Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ryerson Holding and Carpenter Technology

The main advantage of trading using opposite Ryerson Holding and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ryerson Holding 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.

The idea behind Ryerson Holding Corp and Carpenter Technology 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.