Correlation Between CARPENTER and WBI Power

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

Diversification Opportunities for CARPENTER and WBI Power

0.47

Correlation Coefficient

CARPENTER  WBI Power

Very weak diversification

The 3 months correlation between CARPENTER and WBI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding CARPENTER TECHNOLOGY P and WBI Power Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBI Power Factor 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 WBI Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBI Power Factor has no effect on the direction of CARPENTER i.e., CARPENTER and WBI Power go up and down completely randomly.

Pair Corralation between CARPENTER and WBI Power

Assuming the 90 days trading horizon CARPENTER TECHNOLOGY P is expected to generate 0.36 times more return on investment than WBI Power. However, CARPENTER TECHNOLOGY P is 2.8 times less risky than WBI Power. It trades about 0.02 of its potential returns per unit of risk. WBI Power Factor is currently generating about -0.09 per unit of risk. If you would invest  10,022  in CARPENTER TECHNOLOGY P on December 3, 2024 and sell it today you would earn a total of  25.00  from holding CARPENTER TECHNOLOGY P or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

CARPENTER TECHNOLOGY P  vs.  WBI Power Factor

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CARPENTER TECHNOLOGY P are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CARPENTER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

WBI Power Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days WBI Power Factor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, WBI Power 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 WBI Power

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

The idea behind CARPENTER TECHNOLOGY P and WBI Power Factor 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.