Correlation Between Carrier Global and Lennox International

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Can any of the company-specific risk be diversified away by investing in both Carrier Global and Lennox 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 Carrier Global and Lennox International 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 Lennox International, you can compare the effects of market volatilities on Carrier Global and Lennox 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 Carrier Global with a short position of Lennox International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carrier Global and Lennox International.

Diversification Opportunities for Carrier Global and Lennox International

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Carrier and Lennox is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Carrier Global Corp and Lennox International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennox International 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 Lennox International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennox International has no effect on the direction of Carrier Global i.e., Carrier Global and Lennox International go up and down completely randomly.

Pair Corralation between Carrier Global and Lennox International

Given the investment horizon of 90 days Carrier Global is expected to generate 1.62 times less return on investment than Lennox International. In addition to that, Carrier Global is 1.13 times more volatile than Lennox International. It trades about 0.1 of its total potential returns per unit of risk. Lennox International is currently generating about 0.18 per unit of volatility. If you would invest  56,088  in Lennox International on August 31, 2024 and sell it today you would earn a total of  9,916  from holding Lennox International or generate 17.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Carrier Global Corp  vs.  Lennox International

 Performance 
       Timeline  
Carrier Global Corp 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Insignificant
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.
Lennox International 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lennox International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Lennox International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Carrier Global and Lennox International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carrier Global and Lennox International

The main advantage of trading using opposite Carrier Global and Lennox International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carrier Global position performs unexpectedly, Lennox 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 Lennox International will offset losses from the drop in Lennox International's long position.
The idea behind Carrier Global Corp and Lennox International 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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