Correlation Between Carpenter Technology and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both Carpenter Technology and Reliance Steel 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 Reliance Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carpenter Technology and Reliance Steel Aluminum, you can compare the effects of market volatilities on Carpenter Technology and Reliance Steel 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 Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carpenter Technology and Reliance Steel.
Diversification Opportunities for Carpenter Technology and Reliance Steel
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Carpenter and Reliance is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum 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 Reliance Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Steel Aluminum has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Reliance Steel go up and down completely randomly.
Pair Corralation between Carpenter Technology and Reliance Steel
Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.26 times more return on investment than Reliance Steel. However, Carpenter Technology is 1.26 times more volatile than Reliance Steel Aluminum. It trades about 0.35 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about -0.4 per unit of risk. If you would invest 7,001 in Carpenter Technology on January 27, 2024 and sell it today you would earn a total of 1,174 from holding Carpenter Technology or generate 16.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Carpenter Technology vs. Reliance Steel Aluminum
Performance |
| Timeline |
| Carpenter Technology |
| Reliance Steel Aluminum |
Carpenter Technology and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carpenter Technology and Reliance Steel
The main advantage of trading using opposite Carpenter Technology and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carpenter Technology position performs unexpectedly, Reliance Steel 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 Reliance Steel will offset losses from the drop in Reliance Steel's long position.| Carpenter Technology vs. Mueller Industries | Carpenter Technology vs. ESAB Corp | Carpenter Technology vs. Northwest Pipe | Carpenter Technology vs. Insteel Industries |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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