Correlation Between Carpenter Technology and China International

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Can any of the company-specific risk be diversified away by investing in both Carpenter Technology and China International 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 China International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carpenter Technology and China International Marine, you can compare the effects of market volatilities on Carpenter Technology and China International 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 China International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carpenter Technology and China International.

Diversification Opportunities for Carpenter Technology and China International

-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between Carpenter and China is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and China International Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China International 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 China International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China International has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and China International go up and down completely randomly.

Pair Corralation between Carpenter Technology and China International

Assuming the 90 days horizon Carpenter Technology is expected to generate 0.65 times more return on investment than China International. However, Carpenter Technology is 1.55 times less risky than China International. It trades about 0.2 of its potential returns per unit of risk. China International Marine is currently generating about -0.15 per unit of risk. If you would invest  16,600  in Carpenter Technology on October 15, 2024 and sell it today you would earn a total of  1,100  from holding Carpenter Technology or generate 6.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Carpenter Technology  vs.  China International Marine

 Performance 
       Timeline  
Carpenter Technology 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 10 (%) 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.
China International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days China International Marine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Carpenter Technology and China International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carpenter Technology and China International

The main advantage of trading using opposite Carpenter Technology and China International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carpenter Technology position performs unexpectedly, China International 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 China International will offset losses from the drop in China International's long position.
The idea behind Carpenter Technology and China International Marine 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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