Correlation Between Crane and Middleby Corp

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

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

Diversification Opportunities for Crane and Middleby Corp

0.41

Correlation Coefficient

Crane  Middleby Corp

Very weak diversification

The 3 months correlation between Crane and Middleby is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Middleby Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middleby Corp 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 Middleby Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middleby Corp has no effect on the direction of Crane i.e., Crane and Middleby Corp go up and down completely randomly.

Pair Corralation between Crane and Middleby Corp

Allowing for the 90-day total investment horizon Crane Company is expected to generate 0.95 times more return on investment than Middleby Corp. However, Crane Company is 1.06 times less risky than Middleby Corp. It trades about 0.17 of its potential returns per unit of risk. Middleby Corp is currently generating about 0.03 per unit of risk. If you would invest  15,073  in Crane Company on August 31, 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	Weak
Accuracy	98.44%
Values	Daily Returns

Crane Company  vs.  Middleby Corp

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 inconsistent basic indicators, Crane reported solid returns over the last few months and may actually be approaching a breakup point.

Middleby Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Middleby Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Middleby Corp is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Crane and Middleby Corp

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

The idea behind Crane Company and Middleby Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.