Correlation Between Trane Technologies and Carrier GlobalCorp

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

By analyzing existing cross correlation between Trane Technologies plc and Carrier GlobalCorp, you can compare the effects of market volatilities on Trane Technologies and Carrier GlobalCorp 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 Trane Technologies with a short position of Carrier GlobalCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and Carrier GlobalCorp.

Diversification Opportunities for Trane Technologies and Carrier GlobalCorp

0.92

Correlation Coefficient

Trane Technologies  Carrier GlobalCorp

Almost no diversification

The 3 months correlation between Trane and Carrier is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Carrier GlobalCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrier GlobalCorp and Trane Technologies 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 Trane Technologies plc are associated (or correlated) with Carrier GlobalCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrier GlobalCorp has no effect on the direction of Trane Technologies i.e., Trane Technologies and Carrier GlobalCorp go up and down completely randomly.

Pair Corralation between Trane Technologies and Carrier GlobalCorp

Allowing for the 90-day total investment horizon Trane Technologies plc is expected to generate 0.91 times more return on investment than Carrier GlobalCorp. However, Trane Technologies plc is 1.1 times less risky than Carrier GlobalCorp. It trades about 0.12 of its potential returns per unit of risk. Carrier GlobalCorp is currently generating about 0.08 per unit of risk. If you would invest  31,498  in Trane Technologies plc on March 2, 2024 and sell it today you would earn a total of  1,002  from holding Trane Technologies plc or generate 3.18% return on investment over 90 days.

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

Trane Technologies plc  vs.  Carrier GlobalCorp

Trane Technologies plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Trane Technologies may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Carrier GlobalCorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carrier GlobalCorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Carrier GlobalCorp may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Trane Technologies and Carrier GlobalCorp

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

The idea behind Trane Technologies plc and Carrier GlobalCorp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.