Correlation Between CARPENTER and SPDR Portfolio

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

Diversification Opportunities for CARPENTER and SPDR Portfolio

0.18

Correlation Coefficient

CARPENTER  SPDR Portfolio

Average diversification

The 3 months correlation between CARPENTER and SPDR is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding CARPENTER TECHNOLOGY P and SPDR Portfolio Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Aggregate 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 SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Aggregate has no effect on the direction of CARPENTER i.e., CARPENTER and SPDR Portfolio go up and down completely randomly.

Pair Corralation between CARPENTER and SPDR Portfolio

Assuming the 90 days trading horizon CARPENTER TECHNOLOGY P is expected to generate 1.56 times more return on investment than SPDR Portfolio. However, CARPENTER is 1.56 times more volatile than SPDR Portfolio Aggregate. It trades about 0.02 of its potential returns per unit of risk. SPDR Portfolio Aggregate is currently generating about -0.1 per unit of risk. If you would invest  9,944  in CARPENTER TECHNOLOGY P on September 13, 2024 and sell it today you would earn a total of  66.00  from holding CARPENTER TECHNOLOGY P or generate 0.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

CARPENTER TECHNOLOGY P  vs.  SPDR Portfolio Aggregate

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.

SPDR Portfolio Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CARPENTER and SPDR Portfolio

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

The idea behind CARPENTER TECHNOLOGY P and SPDR Portfolio Aggregate 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.