Correlation Between Crane and Ingersoll Rand

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

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

Diversification Opportunities for Crane and Ingersoll Rand

0.81

Correlation Coefficient

Crane  Ingersoll Rand

Very poor diversification

The 3 months correlation between Crane and Ingersoll is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Ingersoll Rand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingersoll Rand 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 Ingersoll Rand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingersoll Rand has no effect on the direction of Crane i.e., Crane and Ingersoll Rand go up and down completely randomly.

Pair Corralation between Crane and Ingersoll Rand

Allowing for the 90-day total investment horizon Crane Company is expected to generate 1.26 times more return on investment than Ingersoll Rand. However, Crane is 1.26 times more volatile than Ingersoll Rand. It trades about 0.17 of its potential returns per unit of risk. Ingersoll Rand is currently generating about 0.18 per unit of risk. If you would invest  15,073  in Crane Company on September 2, 2024 and sell it today you would earn a total of  3,135  from holding Crane Company or generate 20.8% return on investment over 90 days.

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

Crane Company  vs.  Ingersoll Rand

Crane Company

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Crane reported solid returns over the last few months and may actually be approaching a breakup point.

Ingersoll Rand

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ingersoll Rand are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Ingersoll Rand reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crane and Ingersoll Rand

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

The idea behind Crane Company and Ingersoll Rand 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.