Correlation Between Carrier Global and Carlisle Companies

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

By analyzing existing cross correlation between Carrier Global Corp and Carlisle Companies Incorporated, you can compare the effects of market volatilities on Carrier Global and Carlisle Companies 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 Carrier Global with a short position of Carlisle Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carrier Global and Carlisle Companies.

Diversification Opportunities for Carrier Global and Carlisle Companies

0.78

Correlation Coefficient

Carrier Global  Carlisle Companies

Poor diversification

The 3 months correlation between Carrier and Carlisle is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Carrier Global Corp and Carlisle Companies Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlisle Companies and Carrier Global 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 Carrier Global Corp are associated (or correlated) with Carlisle Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlisle Companies has no effect on the direction of Carrier Global i.e., Carrier Global and Carlisle Companies go up and down completely randomly.

Pair Corralation between Carrier Global and Carlisle Companies

Given the investment horizon of 90 days Carrier Global is expected to generate 1.23 times less return on investment than Carlisle Companies. But when comparing it to its historical volatility, Carrier Global Corp is 1.06 times less risky than Carlisle Companies. It trades about 0.1 of its potential returns per unit of risk. Carlisle Companies Incorporated is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  40,250  in Carlisle Companies Incorporated on August 31, 2024 and sell it today you would earn a total of  5,420  from holding Carlisle Companies Incorporated or generate 13.47% return on investment over 90 days.

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

Carrier Global Corp  vs.  Carlisle Companies Incorporate

Carrier Global Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carrier Global Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Carrier Global may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Carlisle Companies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carlisle Companies Incorporated are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Carlisle Companies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carrier Global and Carlisle Companies

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

The idea behind Carrier Global Corp and Carlisle Companies 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.