Correlation Between CARPENTER and Ultramid Cap

Can any of the company-specific risk be diversified away by investing in both CARPENTER and Ultramid Cap 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 Ultramid Cap 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 Ultramid Cap Profund Ultramid Cap, you can compare the effects of market volatilities on CARPENTER and Ultramid Cap 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 Ultramid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARPENTER and Ultramid Cap.

Diversification Opportunities for CARPENTER and Ultramid Cap

0.46

Correlation Coefficient

CARPENTER  Ultramid Cap

Very weak diversification

The 3 months correlation between CARPENTER and Ultramid is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding CARPENTER TECHNOLOGY P and Ultramid Cap Profund Ultramid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultramid Cap Profund 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 Ultramid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultramid Cap Profund has no effect on the direction of CARPENTER i.e., CARPENTER and Ultramid Cap go up and down completely randomly.

Pair Corralation between CARPENTER and Ultramid Cap

Assuming the 90 days trading horizon CARPENTER TECHNOLOGY P is expected to generate 0.16 times more return on investment than Ultramid Cap. However, CARPENTER TECHNOLOGY P is 6.38 times less risky than Ultramid Cap. It trades about 0.0 of its potential returns per unit of risk. Ultramid Cap Profund Ultramid Cap is currently generating about -0.15 per unit of risk. If you would invest  10,042  in CARPENTER TECHNOLOGY P on December 2, 2024 and sell it today you would earn a total of  5.00  from holding CARPENTER TECHNOLOGY P or generate 0.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

CARPENTER TECHNOLOGY P  vs.  Ultramid Cap Profund Ultramid

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.

Ultramid Cap Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultramid Cap Profund Ultramid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with CARPENTER and Ultramid Cap

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

The idea behind CARPENTER TECHNOLOGY P and Ultramid Cap Profund Ultramid Cap 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.