Correlation Between Crane and Crane NXT

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

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

Diversification Opportunities for Crane and Crane NXT

0.46

Correlation Coefficient

Crane  Crane NXT

Very weak diversification

The 3 months correlation between Crane and Crane is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Crane NXT Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane NXT 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 Crane NXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crane NXT has no effect on the direction of Crane i.e., Crane and Crane NXT go up and down completely randomly.

Pair Corralation between Crane and Crane NXT

Allowing for the 90-day total investment horizon Crane Company is expected to generate 1.42 times more return on investment than Crane NXT. However, Crane is 1.42 times more volatile than Crane NXT Co. It trades about 0.01 of its potential returns per unit of risk. Crane NXT Co is currently generating about -0.09 per unit of risk. If you would invest  15,620  in Crane Company on December 26, 2024 and sell it today you would lose (13.00) from holding Crane Company or give up 0.08% of portfolio value over 90 days.

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

Crane Company  vs.  Crane NXT Co

Crane Company

Risk-Adjusted Performance

Weak

Over the last 90 days Crane Company has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Crane NXT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crane NXT Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Crane and Crane NXT

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

The idea behind Crane Company and Crane NXT Co 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.