Correlation Between Carpenter Technology and SGS SA

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

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

Diversification Opportunities for Carpenter Technology and SGS SA

-0.86

Correlation Coefficient

Carpenter Technology  SGS SA

Pay attention - limited upside

The 3 months correlation between Carpenter and SGS is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and SGS SA go up and down completely randomly.

Pair Corralation between Carpenter Technology and SGS SA

Considering the 90-day investment horizon Carpenter Technology is expected to under-perform the SGS SA. In addition to that, Carpenter Technology is 2.47 times more volatile than SGS SA. It trades about -0.08 of its total potential returns per unit of risk. SGS SA is currently generating about 0.12 per unit of volatility. If you would invest  985.00  in SGS SA on September 19, 2024 and sell it today you would earn a total of  21.00  from holding SGS SA or generate 2.13% return on investment over 90 days.

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

Carpenter Technology  vs.  SGS SA

Carpenter Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 6 (%) 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.

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Carpenter Technology and SGS SA

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

The idea behind Carpenter Technology and SGS SA 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.