Correlation Between Alcoa Corp and Carpenter Technology
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Carpenter Technology 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 Alcoa Corp and Carpenter Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Carpenter Technology, you can compare the effects of market volatilities on Alcoa Corp and Carpenter Technology 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 Alcoa Corp with a short position of Carpenter Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Carpenter Technology.
Diversification Opportunities for Alcoa Corp and Carpenter Technology
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and Carpenter is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Carpenter Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carpenter Technology and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with Carpenter Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carpenter Technology has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Carpenter Technology go up and down completely randomly.
Pair Corralation between Alcoa Corp and Carpenter Technology
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 16.27 times less return on investment than Carpenter Technology. But when comparing it to its historical volatility, Alcoa Corp is 1.4 times less risky than Carpenter Technology. It trades about 0.04 of its potential returns per unit of risk. Carpenter Technology is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 7,568 in Carpenter Technology on February 13, 2024 and sell it today you would earn a total of 2,899 from holding Carpenter Technology or generate 38.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Carpenter Technology
Performance |
| Timeline |
| Alcoa Corp |
| Carpenter Technology |
Alcoa Corp and Carpenter Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Carpenter Technology
The main advantage of trading using opposite Alcoa Corp and Carpenter Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Carpenter Technology 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 Carpenter Technology will offset losses from the drop in Carpenter Technology's long position.| Alcoa Corp vs. Constellium Nv | Alcoa Corp vs. Century Aluminum | Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Kaiser Aluminum |
| Carpenter Technology vs. Insteel Industries | Carpenter Technology vs. Mayville Engineering Co | Carpenter Technology vs. Gulf Island Fabrication | Carpenter Technology vs. ESAB Corp |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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