Correlation Between CARPENTER and Black Diamond

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

By analyzing existing cross correlation between CARPENTER TECHNOLOGY P and Black Diamond Group, you can compare the effects of market volatilities on CARPENTER and Black Diamond 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 with a short position of Black Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARPENTER and Black Diamond.

Diversification Opportunities for CARPENTER and Black Diamond

0.26

Correlation Coefficient

CARPENTER  Black Diamond

Modest diversification

The 3 months correlation between CARPENTER and Black is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CARPENTER TECHNOLOGY P and Black Diamond Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Diamond Group and CARPENTER 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 P are associated (or correlated) with Black Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Diamond Group has no effect on the direction of CARPENTER i.e., CARPENTER and Black Diamond go up and down completely randomly.

Pair Corralation between CARPENTER and Black Diamond

Assuming the 90 days trading horizon CARPENTER TECHNOLOGY P is expected to generate 0.33 times more return on investment than Black Diamond. However, CARPENTER TECHNOLOGY P is 3.07 times less risky than Black Diamond. It trades about -0.01 of its potential returns per unit of risk. Black Diamond Group is currently generating about -0.07 per unit of risk. If you would invest  10,039  in CARPENTER TECHNOLOGY P on September 12, 2024 and sell it today you would lose (29.00) from holding CARPENTER TECHNOLOGY P or give up 0.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

CARPENTER TECHNOLOGY P  vs.  Black Diamond Group

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARPENTER TECHNOLOGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARPENTER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Black Diamond Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Diamond Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CARPENTER and Black Diamond

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

The idea behind CARPENTER TECHNOLOGY P and Black Diamond Group 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.