Correlation Between Trade Desk and Carpenter Technology

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

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

Diversification Opportunities for Trade Desk and Carpenter Technology

0.35

Correlation Coefficient

Trade Desk  Carpenter Technology

Weak diversification

The 3 months correlation between Trade and Carpenter is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Trade Desk and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and Trade Desk 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 The Trade Desk 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 Trade Desk i.e., Trade Desk and Carpenter Technology go up and down completely randomly.

Pair Corralation between Trade Desk and Carpenter Technology

Assuming the 90 days trading horizon The Trade Desk is expected to under-perform the Carpenter Technology. In addition to that, Trade Desk is 1.27 times more volatile than Carpenter Technology. It trades about -0.21 of its total potential returns per unit of risk. Carpenter Technology is currently generating about 0.05 per unit of volatility. If you would invest  16,084  in Carpenter Technology on December 29, 2024 and sell it today you would earn a total of  1,416  from holding Carpenter Technology or generate 8.8% return on investment over 90 days.

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

The Trade Desk  vs.  Carpenter Technology

Trade Desk

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Trade Desk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 fragile basic indicators, Carpenter Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trade Desk and Carpenter Technology

The main advantage of trading using opposite Trade Desk and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk 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 The Trade Desk 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.