Correlation Between Carpenter Technology and Unit

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

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

Diversification Opportunities for Carpenter Technology and Unit

-0.56

Correlation Coefficient

Carpenter Technology  Unit

Excellent diversification

The 3 months correlation between Carpenter and Unit is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Unit Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unit 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 Unit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unit has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Unit go up and down completely randomly.

Pair Corralation between Carpenter Technology and Unit

Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.15 times more return on investment than Unit. However, Carpenter Technology is 1.15 times more volatile than Unit Corporation. It trades about 0.14 of its potential returns per unit of risk. Unit Corporation is currently generating about 0.07 per unit of risk. If you would invest  14,119  in Carpenter Technology on September 15, 2024 and sell it today you would earn a total of  3,290  from holding Carpenter Technology or generate 23.3% return on investment over 90 days.

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

Carpenter Technology  vs.  Unit Corp.

Carpenter Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 10 (%) 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.

Unit

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Unit Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Unit may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Carpenter Technology and Unit

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

The idea behind Carpenter Technology and Unit Corporation 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.