Correlation Between Carpenter Technology and Ryerson Holding

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

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

Diversification Opportunities for Carpenter Technology and Ryerson Holding

0.94

Correlation Coefficient

Carpenter Technology  Ryerson Holding

Almost no diversification

The 3 months correlation between Carpenter and Ryerson is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Ryerson Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryerson Holding and Carpenter Technology 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 are associated (or correlated) with Ryerson Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryerson Holding has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Ryerson Holding go up and down completely randomly.

Pair Corralation between Carpenter Technology and Ryerson Holding

Assuming the 90 days horizon Carpenter Technology is expected to generate 1.04 times more return on investment than Ryerson Holding. However, Carpenter Technology is 1.04 times more volatile than Ryerson Holding. It trades about 0.16 of its potential returns per unit of risk. Ryerson Holding is currently generating about 0.15 per unit of risk. If you would invest  12,583  in Carpenter Technology on September 16, 2024 and sell it today you would earn a total of  4,217  from holding Carpenter Technology or generate 33.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Carpenter Technology  vs.  Ryerson Holding

Carpenter Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Carpenter Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Ryerson Holding

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryerson Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ryerson Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carpenter Technology and Ryerson Holding

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

The idea behind Carpenter Technology and Ryerson Holding 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.