Correlation Between Carpenter Technology and Arrowhead Pharmaceuticals

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

Diversification Opportunities for Carpenter Technology and Arrowhead Pharmaceuticals

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Carpenter and Arrowhead is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Arrowhead Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrowhead Pharmaceuticals has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Arrowhead Pharmaceuticals go up and down completely randomly.

Pair Corralation between Carpenter Technology and Arrowhead Pharmaceuticals

Considering the 90-day investment horizon Carpenter Technology is expected to generate 4.31 times less return on investment than Arrowhead Pharmaceuticals. But when comparing it to its historical volatility, Carpenter Technology is 2.15 times less risky than Arrowhead Pharmaceuticals. It trades about 0.03 of its potential returns per unit of risk. Arrowhead Pharmaceuticals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,046  in Arrowhead Pharmaceuticals on September 10, 2022 and sell it today you would earn a total of  110.00  from holding Arrowhead Pharmaceuticals or generate 3.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Carpenter Technology  vs.  Arrowhead Pharmaceuticals

 Performance (%) 
       Timeline  
Carpenter Technology 
Carpenter Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Carpenter Technology may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Carpenter Price Channel

Arrowhead Pharmaceuticals 
Arrowhead Performance
0 of 100
Over the last 90 days Arrowhead Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Arrowhead Price Channel

Carpenter Technology and Arrowhead Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carpenter Technology and Arrowhead Pharmaceuticals

The main advantage of trading using opposite Carpenter Technology and Arrowhead Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carpenter Technology position performs unexpectedly, Arrowhead Pharmaceuticals 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 Arrowhead Pharmaceuticals will offset losses from the drop in Arrowhead Pharmaceuticals' long position.
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The idea behind Carpenter Technology and Arrowhead Pharmaceuticals 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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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 Fund Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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