Correlation Between Carpenter Technology and Mueller Industries

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

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

Diversification Opportunities for Carpenter Technology and Mueller Industries

0.6

Correlation Coefficient

Carpenter Technology  Mueller Industries

Poor diversification

The 3 months correlation between Carpenter and Mueller is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Mueller Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mueller Industries 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 Mueller Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mueller Industries has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Mueller Industries go up and down completely randomly.

Pair Corralation between Carpenter Technology and Mueller Industries

Assuming the 90 days horizon Carpenter Technology is expected to generate 1.01 times more return on investment than Mueller Industries. However, Carpenter Technology is 1.01 times more volatile than Mueller Industries. It trades about 0.14 of its potential returns per unit of risk. Mueller Industries is currently generating about 0.1 per unit of risk. If you would invest  6,342  in Carpenter Technology on September 27, 2024 and sell it today you would earn a total of  9,758  from holding Carpenter Technology or generate 153.86% return on investment over 90 days.

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

Carpenter Technology  vs.  Mueller Industries

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.

Mueller Industries

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Carpenter Technology and Mueller Industries

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

The idea behind Carpenter Technology and Mueller Industries 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 CEOs Directory module to screen CEOs from public companies around the world.