Correlation Between Carpenter Technology and Quanex Building

Can any of the company-specific risk be diversified away by investing in both Carpenter Technology and Quanex Building 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 Quanex Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carpenter Technology and Quanex Building Products, you can compare the effects of market volatilities on Carpenter Technology and Quanex Building 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 Quanex Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carpenter Technology and Quanex Building.

Diversification Opportunities for Carpenter Technology and Quanex Building

0.62

Correlation Coefficient

Carpenter Technology  Quanex Building

Poor diversification

The 3 months correlation between Carpenter and Quanex is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products 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 Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Carpenter Technology i.e., Carpenter Technology and Quanex Building go up and down completely randomly.

Pair Corralation between Carpenter Technology and Quanex Building

Considering the 90-day investment horizon Carpenter Technology is expected to generate 0.7 times more return on investment than Quanex Building. However, Carpenter Technology is 1.42 times less risky than Quanex Building. It trades about 0.15 of its potential returns per unit of risk. Quanex Building Products is currently generating about 0.07 per unit of risk. If you would invest  21,192  in Carpenter Technology on May 4, 2025 and sell it today you would earn a total of  4,586  from holding Carpenter Technology or generate 21.64% return on investment over 90 days.

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

Carpenter Technology  vs.  Quanex Building Products

Carpenter Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Carpenter Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Quanex Building Products

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quanex Building Products are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Quanex Building showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carpenter Technology and Quanex Building

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

The idea behind Carpenter Technology and Quanex Building Products 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.