Correlation Between Crane and Barnes

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

By analyzing existing cross correlation between Crane Company and Barnes Group, you can compare the effects of market volatilities on Crane and Barnes 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 Crane with a short position of Barnes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Barnes.

Diversification Opportunities for Crane and Barnes

0.11

Correlation Coefficient

Crane  Barnes

Average diversification

The 3 months correlation between Crane and Barnes is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Crane 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 Crane Company are associated (or correlated) with Barnes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnes Group has no effect on the direction of Crane i.e., Crane and Barnes go up and down completely randomly.

Pair Corralation between Crane and Barnes

Allowing for the 90-day total investment horizon Crane Company is expected to generate 31.34 times more return on investment than Barnes. However, Crane is 31.34 times more volatile than Barnes Group. It trades about 0.03 of its potential returns per unit of risk. Barnes Group is currently generating about 0.39 per unit of risk. If you would invest  15,620  in Crane Company on December 26, 2024 and sell it today you would earn a total of  419.00  from holding Crane Company or generate 2.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	33.33%
Values	Daily Returns

Crane Company  vs.  Barnes Group

Crane Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Crane is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Barnes Group

Risk-Adjusted Performance

Very Strong

Over the last 90 days Barnes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Barnes is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Crane and Barnes

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

The idea behind Crane Company and Barnes Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.