Correlation Between Carpenter Technology and Constellium

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Can any of the company-specific risk be diversified away by investing in both Carpenter Technology and Constellium 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 Constellium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carpenter Technology and Constellium Nv, you can compare the effects of market volatilities on Carpenter Technology and Constellium 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 Constellium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carpenter Technology and Constellium.

Diversification Opportunities for Carpenter Technology and Constellium

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Carpenter and Constellium is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Constellium Nv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellium Nv 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 Constellium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellium Nv has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Constellium go up and down completely randomly.

Pair Corralation between Carpenter Technology and Constellium

Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.44 times less return on investment than Constellium. In addition to that, Carpenter Technology is 1.15 times more volatile than Constellium Nv. It trades about 0.21 of its total potential returns per unit of risk. Constellium Nv is currently generating about 0.35 per unit of volatility. If you would invest  1,904  in Constellium Nv on December 29, 2023 and sell it today you would earn a total of  269.00  from holding Constellium Nv or generate 14.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

Carpenter Technology  vs.  Constellium Nv

 Performance 
       Timeline  
Carpenter Technology 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carpenter Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Constellium Nv 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Constellium Nv are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Constellium may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Carpenter Technology and Constellium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carpenter Technology and Constellium

The main advantage of trading using opposite Carpenter Technology and Constellium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carpenter Technology position performs unexpectedly, Constellium 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 Constellium will offset losses from the drop in Constellium's long position.
The idea behind Carpenter Technology and Constellium Nv 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.
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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