Correlation Between Apple and Carpenter Technology

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

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

Diversification Opportunities for Apple and Carpenter Technology

0.65

Correlation Coefficient

Apple  Carpenter Technology

Poor diversification

The 3 months correlation between Apple and Carpenter is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and Apple 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 Apple Inc 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 Apple i.e., Apple and Carpenter Technology go up and down completely randomly.

Pair Corralation between Apple and Carpenter Technology

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.44 times more return on investment than Carpenter Technology. However, Apple Inc is 2.25 times less risky than Carpenter Technology. It trades about 0.24 of its potential returns per unit of risk. Carpenter Technology is currently generating about 0.07 per unit of risk. If you would invest  20,311  in Apple Inc on September 26, 2024 and sell it today you would earn a total of  4,199  from holding Apple Inc or generate 20.67% return on investment over 90 days.

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

Apple Inc  vs.  Carpenter Technology

Apple Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

Carpenter Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 5 (%) 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 Apple and Carpenter Technology

The main advantage of trading using opposite Apple and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.