Correlation Between CARPENTER and US Gold

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

Diversification Opportunities for CARPENTER and US Gold

-0.12

Correlation Coefficient

CARPENTER  US Gold

Good diversification

The 3 months correlation between CARPENTER and USAU is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding CARPENTER TECHNOLOGY P and US Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Gold Corp 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 US Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Gold Corp has no effect on the direction of CARPENTER i.e., CARPENTER and US Gold go up and down completely randomly.

Pair Corralation between CARPENTER and US Gold

Assuming the 90 days trading horizon CARPENTER TECHNOLOGY P is expected to under-perform the US Gold. But the bond apears to be less risky and, when comparing its historical volatility, CARPENTER TECHNOLOGY P is 7.85 times less risky than US Gold. The bond trades about -0.01 of its potential returns per unit of risk. The US Gold Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  586.00  in US Gold Corp on September 12, 2024 and sell it today you would earn a total of  115.00  from holding US Gold Corp or generate 19.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

CARPENTER TECHNOLOGY P  vs.  US Gold Corp

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

0 of 100

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

US Gold Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, US Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CARPENTER and US Gold

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

The idea behind CARPENTER TECHNOLOGY P and US Gold Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.