Correlation Between DexCom and Carpenter Technology

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

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

Diversification Opportunities for DexCom and Carpenter Technology

0.82

Correlation Coefficient

DexCom  Carpenter Technology

Very poor diversification

The 3 months correlation between DexCom and Carpenter is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and DexCom 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 DexCom Inc are associated (or correlated) with Carpenter Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carpenter Technology has no effect on the direction of DexCom i.e., DexCom and Carpenter Technology go up and down completely randomly.

Pair Corralation between DexCom and Carpenter Technology

Assuming the 90 days horizon DexCom Inc is expected to generate 1.36 times more return on investment than Carpenter Technology. However, DexCom is 1.36 times more volatile than Carpenter Technology. It trades about 0.2 of its potential returns per unit of risk. Carpenter Technology is currently generating about -0.31 per unit of risk. If you would invest  6,966  in DexCom Inc on September 25, 2024 and sell it today you would earn a total of  695.00  from holding DexCom Inc or generate 9.98% return on investment over 90 days.

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

DexCom Inc  vs.  Carpenter Technology

DexCom Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DexCom reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly fragile basic indicators, Carpenter Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DexCom and Carpenter Technology

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

The idea behind DexCom Inc and Carpenter Technology 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.