Correlation Between STRAYER EDUCATION and Carpenter Technology

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

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

Diversification Opportunities for STRAYER EDUCATION and Carpenter Technology

-0.02

Correlation Coefficient

STRAYER EDUCATION  Carpenter Technology

Good diversification

The 3 months correlation between STRAYER and Carpenter is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding STRAYER EDUCATION and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and STRAYER EDUCATION 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 STRAYER EDUCATION 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 STRAYER EDUCATION i.e., STRAYER EDUCATION and Carpenter Technology go up and down completely randomly.

Pair Corralation between STRAYER EDUCATION and Carpenter Technology

Assuming the 90 days trading horizon STRAYER EDUCATION is expected to under-perform the Carpenter Technology. In addition to that, STRAYER EDUCATION is 1.63 times more volatile than Carpenter Technology. It trades about -0.2 of its total potential returns per unit of risk. Carpenter Technology is currently generating about 0.15 per unit of volatility. If you would invest  18,100  in Carpenter Technology on December 5, 2024 and sell it today you would earn a total of  1,500  from holding Carpenter Technology or generate 8.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

STRAYER EDUCATION  vs.  Carpenter Technology

STRAYER EDUCATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days STRAYER EDUCATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Carpenter Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Carpenter Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with STRAYER EDUCATION and Carpenter Technology

The main advantage of trading using opposite STRAYER EDUCATION and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STRAYER EDUCATION 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 STRAYER EDUCATION 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.