Correlation Between Carlisle Companies and Lennox International

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

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

Diversification Opportunities for Carlisle Companies and Lennox International

-0.15

Correlation Coefficient

Carlisle Companies  Lennox International

Good diversification

The 3 months correlation between Carlisle and Lennox is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Carlisle Companies Incorporate and Lennox International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennox International and Carlisle Companies 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 Carlisle Companies Incorporated are associated (or correlated) with Lennox International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennox International has no effect on the direction of Carlisle Companies i.e., Carlisle Companies and Lennox International go up and down completely randomly.

Pair Corralation between Carlisle Companies and Lennox International

Considering the 90-day investment horizon Carlisle Companies Incorporated is expected to generate 0.88 times more return on investment than Lennox International. However, Carlisle Companies Incorporated is 1.14 times less risky than Lennox International. It trades about 0.02 of its potential returns per unit of risk. Lennox International is currently generating about -0.01 per unit of risk. If you would invest  38,031  in Carlisle Companies Incorporated on February 3, 2025 and sell it today you would earn a total of  592.00  from holding Carlisle Companies Incorporated or generate 1.56% return on investment over 90 days.

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

Carlisle Companies Incorporate  vs.  Lennox International

Carlisle Companies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carlisle Companies Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Carlisle Companies is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Lennox International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lennox International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Lennox International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Carlisle Companies and Lennox International

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

The idea behind Carlisle Companies Incorporated and Lennox International 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.