Correlation Between Yamaha and Carpenter Technology

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

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

Diversification Opportunities for Yamaha and Carpenter Technology

-0.64

Correlation Coefficient

Yamaha  Carpenter Technology

Excellent diversification

The 3 months correlation between Yamaha and Carpenter is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Yamaha and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and Yamaha 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 Yamaha are associated (or correlated) with Carpenter Technology. 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 Yamaha i.e., Yamaha and Carpenter Technology go up and down completely randomly.

Pair Corralation between Yamaha and Carpenter Technology

Assuming the 90 days horizon Yamaha is expected to generate 205.42 times less return on investment than Carpenter Technology. But when comparing it to its historical volatility, Yamaha is 1.26 times less risky than Carpenter Technology. It trades about 0.0 of its potential returns per unit of risk. Carpenter Technology is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  9,821  in Carpenter Technology on October 7, 2024 and sell it today you would earn a total of  7,179  from holding Carpenter Technology or generate 73.1% return on investment over 90 days.

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

Yamaha  vs.  Carpenter Technology

Yamaha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Carpenter Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 8 (%) 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.

Pair Trading with Yamaha and Carpenter Technology

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

The idea behind Yamaha and Carpenter Technology 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.