Correlation Between Carpenter Technology and BayCurrent Consulting

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

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

Diversification Opportunities for Carpenter Technology and BayCurrent Consulting

-0.85

Correlation Coefficient

Carpenter Technology  BayCurrent Consulting

Pay attention - limited upside

The 3 months correlation between Carpenter and BayCurrent is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and BayCurrent Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BayCurrent Consulting 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 BayCurrent Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BayCurrent Consulting has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and BayCurrent Consulting go up and down completely randomly.

Pair Corralation between Carpenter Technology and BayCurrent Consulting

If you would invest  14,681  in Carpenter Technology on September 18, 2024 and sell it today you would earn a total of  2,572  from holding Carpenter Technology or generate 17.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Carpenter Technology  vs.  BayCurrent Consulting

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. In spite of comparatively unfluctuating basic indicators, Carpenter Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

BayCurrent Consulting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BayCurrent Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BayCurrent Consulting is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carpenter Technology and BayCurrent Consulting

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

The idea behind Carpenter Technology and BayCurrent Consulting 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.