Correlation Between Universal and CARPENTER

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

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

Diversification Opportunities for Universal and CARPENTER

-0.05

Correlation Coefficient

Universal  CARPENTER

Good diversification

The 3 months correlation between Universal and CARPENTER is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Universal and CARPENTER TECHNOLOGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARPENTER TECHNOLOGY and Universal 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 Universal are associated (or correlated) with CARPENTER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARPENTER TECHNOLOGY has no effect on the direction of Universal i.e., Universal and CARPENTER go up and down completely randomly.

Pair Corralation between Universal and CARPENTER

Considering the 90-day investment horizon Universal is expected to under-perform the CARPENTER. In addition to that, Universal is 3.47 times more volatile than CARPENTER TECHNOLOGY P. It trades about -0.31 of its total potential returns per unit of risk. CARPENTER TECHNOLOGY P is currently generating about -0.07 per unit of volatility. If you would invest  10,060  in CARPENTER TECHNOLOGY P on October 9, 2024 and sell it today you would lose (50.00) from holding CARPENTER TECHNOLOGY P or give up 0.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Universal  vs.  CARPENTER TECHNOLOGY P

Universal

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Universal and CARPENTER

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

The idea behind Universal and CARPENTER TECHNOLOGY P 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.