Correlation Between Carpenter Technology and Allegheny Technologies

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

By analyzing existing cross correlation between Carpenter Technology and Allegheny Technologies Incorporated, you can compare the effects of market volatilities on Carpenter Technology and Allegheny Technologies 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 Allegheny Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carpenter Technology and Allegheny Technologies.

Diversification Opportunities for Carpenter Technology and Allegheny Technologies

-0.17

Correlation Coefficient

Carpenter Technology  Allegheny Technologies

Good diversification

The 3 months correlation between Carpenter and Allegheny is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies 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 Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Allegheny Technologies go up and down completely randomly.

Pair Corralation between Carpenter Technology and Allegheny Technologies

Assuming the 90 days horizon Carpenter Technology is expected to under-perform the Allegheny Technologies. In addition to that, Carpenter Technology is 1.57 times more volatile than Allegheny Technologies Incorporated. It trades about -0.38 of its total potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about -0.4 per unit of volatility. If you would invest  5,688  in Allegheny Technologies Incorporated on September 27, 2024 and sell it today you would lose (496.00) from holding Allegheny Technologies Incorporated or give up 8.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Carpenter Technology  vs.  Allegheny Technologies Incorpo

Carpenter Technology

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Carpenter Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Allegheny Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allegheny Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Carpenter Technology and Allegheny Technologies

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

The idea behind Carpenter Technology and Allegheny Technologies Incorporated 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.