Correlation Between SIERRA METALS and Carpenter Technology

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

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

Diversification Opportunities for SIERRA METALS and Carpenter Technology

-0.61

Correlation Coefficient

SIERRA METALS  Carpenter Technology

Excellent diversification

The 3 months correlation between SIERRA and Carpenter is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding SIERRA METALS and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and SIERRA METALS 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 SIERRA METALS 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 SIERRA METALS i.e., SIERRA METALS and Carpenter Technology go up and down completely randomly.

Pair Corralation between SIERRA METALS and Carpenter Technology

Assuming the 90 days trading horizon SIERRA METALS is expected to generate 1.22 times less return on investment than Carpenter Technology. In addition to that, SIERRA METALS is 1.08 times more volatile than Carpenter Technology. It trades about 0.06 of its total potential returns per unit of risk. Carpenter Technology is currently generating about 0.08 per unit of volatility. If you would invest  14,181  in Carpenter Technology on September 25, 2024 and sell it today you would earn a total of  1,919  from holding Carpenter Technology or generate 13.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

SIERRA METALS  vs.  Carpenter Technology

SIERRA METALS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIERRA METALS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SIERRA METALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 SIERRA METALS and Carpenter Technology

The main advantage of trading using opposite SIERRA METALS and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIERRA METALS 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 SIERRA METALS 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.