Correlation Between CARRIER and RH

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

By analyzing existing cross correlation between CARRIER GLOBAL P and RH, you can compare the effects of market volatilities on CARRIER and RH 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 CARRIER with a short position of RH. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARRIER and RH.

Diversification Opportunities for CARRIER and RH

-0.38

Correlation Coefficient

CARRIER  RH

Very good diversification

The 3 months correlation between CARRIER and RH is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding CARRIER GLOBAL P and RH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RH and CARRIER 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 CARRIER GLOBAL P are associated (or correlated) with RH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RH has no effect on the direction of CARRIER i.e., CARRIER and RH go up and down completely randomly.

Pair Corralation between CARRIER and RH

Assuming the 90 days trading horizon CARRIER GLOBAL P is expected to generate 0.2 times more return on investment than RH. However, CARRIER GLOBAL P is 5.1 times less risky than RH. It trades about -0.02 of its potential returns per unit of risk. RH is currently generating about -0.26 per unit of risk. If you would invest  7,753  in CARRIER GLOBAL P on December 21, 2024 and sell it today you would lose (74.00) from holding CARRIER GLOBAL P or give up 0.95% of portfolio value over 90 days.

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

CARRIER GLOBAL P  vs.  RH

CARRIER GLOBAL P

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARRIER GLOBAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARRIER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

RH

Risk-Adjusted Performance

Very Weak

Over the last 90 days RH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with CARRIER and RH

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

The idea behind CARRIER GLOBAL P and RH 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.