Correlation Between CARPENTER and High-yield Municipal

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

By analyzing existing cross correlation between CARPENTER TECHNOLOGY P and High Yield Municipal Fund, you can compare the effects of market volatilities on CARPENTER and High-yield Municipal 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 CARPENTER with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARPENTER and High-yield Municipal.

Diversification Opportunities for CARPENTER and High-yield Municipal

0.61

Correlation Coefficient

CARPENTER  High-yield Municipal

Poor diversification

The 3 months correlation between CARPENTER and High-yield is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CARPENTER TECHNOLOGY P and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and CARPENTER 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 CARPENTER TECHNOLOGY P are associated (or correlated) with High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of CARPENTER i.e., CARPENTER and High-yield Municipal go up and down completely randomly.

Pair Corralation between CARPENTER and High-yield Municipal

Assuming the 90 days trading horizon CARPENTER TECHNOLOGY P is expected to under-perform the High-yield Municipal. But the bond apears to be less risky and, when comparing its historical volatility, CARPENTER TECHNOLOGY P is 1.08 times less risky than High-yield Municipal. The bond trades about -0.02 of its potential returns per unit of risk. The High Yield Municipal Fund is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  886.00  in High Yield Municipal Fund on November 20, 2024 and sell it today you would earn a total of  0.00  from holding High Yield Municipal Fund or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

CARPENTER TECHNOLOGY P  vs.  High Yield Municipal Fund

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

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 current stock price disturbance, may contribute to short-term losses for the investors.

High Yield Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High-yield Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CARPENTER and High-yield Municipal

The main advantage of trading using opposite CARPENTER and High-yield Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARPENTER position performs unexpectedly, High-yield Municipal 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 High-yield Municipal will offset losses from the drop in High-yield Municipal's long position.

The idea behind CARPENTER TECHNOLOGY P and High Yield Municipal Fund 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.