Correlation Between Carpenter Technology and China International

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

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

Diversification Opportunities for Carpenter Technology and China International

-0.1

Correlation Coefficient

Carpenter Technology  China International

Good diversification

The 3 months correlation between Carpenter and China is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and China International Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China International and Carpenter Technology 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 are associated (or correlated) with China International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China International has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and China International go up and down completely randomly.

Pair Corralation between Carpenter Technology and China International

Assuming the 90 days horizon Carpenter Technology is expected to under-perform the China International. But the stock apears to be less risky and, when comparing its historical volatility, Carpenter Technology is 1.35 times less risky than China International. The stock trades about -0.31 of its potential returns per unit of risk. The China International Marine is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  63.00  in China International Marine on September 25, 2024 and sell it today you would lose (1.00) from holding China International Marine or give up 1.59% of portfolio value over 90 days.

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

Carpenter Technology  vs.  China International Marine

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.

China International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China International Marine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carpenter Technology and China International

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

The idea behind Carpenter Technology and China International Marine 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.