Correlation Between Carpenter Technology and Allegheny Technologies

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

By analyzing existing cross correlation between Carpenter Technology and Allegheny Technologies Incorporated, you can compare the effects of market volatilities on Carpenter Technology and Allegheny Technologies 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 Allegheny Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carpenter Technology and Allegheny Technologies.

Diversification Opportunities for Carpenter Technology and Allegheny Technologies

0.79

Correlation Coefficient

Carpenter Technology  Allegheny Technologies

Poor diversification

The 3 months correlation between Carpenter and Allegheny is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies 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 Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Allegheny Technologies go up and down completely randomly.

Pair Corralation between Carpenter Technology and Allegheny Technologies

Considering the 90-day investment horizon Carpenter Technology is expected to generate 0.98 times more return on investment than Allegheny Technologies. However, Carpenter Technology is 1.02 times less risky than Allegheny Technologies. It trades about 0.41 of its potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about 0.18 per unit of risk. If you would invest  7,341  in Carpenter Technology on February 3, 2024 and sell it today you would earn a total of  2,649  from holding Carpenter Technology or generate 36.09% return on investment over 90 days.

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

Carpenter Technology  vs.  Allegheny Technologies Incorpo

Carpenter Technology

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Carpenter Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Allegheny Technologies

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allegheny Technologies Incorporated are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Allegheny Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carpenter Technology and Allegheny Technologies

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

The idea behind Carpenter Technology and Allegheny Technologies Incorporated 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.