Correlation Between CARPENTER and Global X

Can any of the company-specific risk be diversified away by investing in both CARPENTER and Global X 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 Global X 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 Global X MSCI, you can compare the effects of market volatilities on CARPENTER and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARPENTER and Global X.

Diversification Opportunities for CARPENTER and Global X

0.4

Correlation Coefficient

CARPENTER  Global X

Very weak diversification

The 3 months correlation between CARPENTER and Global is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CARPENTER TECHNOLOGY P and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MSCI has no effect on the direction of CARPENTER i.e., CARPENTER and Global X go up and down completely randomly.

Pair Corralation between CARPENTER and Global X

Assuming the 90 days trading horizon CARPENTER is expected to generate 7.4 times less return on investment than Global X. But when comparing it to its historical volatility, CARPENTER TECHNOLOGY P is 2.89 times less risky than Global X. It trades about 0.02 of its potential returns per unit of risk. Global X MSCI is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,392  in Global X MSCI on September 13, 2024 and sell it today you would earn a total of  123.99  from holding Global X MSCI or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

CARPENTER TECHNOLOGY P  vs.  Global X MSCI

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CARPENTER TECHNOLOGY P are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Global X MSCI

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Global X is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CARPENTER and Global X

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

The idea behind CARPENTER TECHNOLOGY P and Global X MSCI 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.