Correlation Between Crane and SIMPPLE

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Can any of the company-specific risk be diversified away by investing in both Crane and SIMPPLE 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 SIMPPLE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and SIMPPLE LTD Ordinary, you can compare the effects of market volatilities on Crane and SIMPPLE 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 SIMPPLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and SIMPPLE.

Diversification Opportunities for Crane and SIMPPLE

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Crane and SIMPPLE is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and SIMPPLE LTD Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMPPLE LTD Ordinary 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 SIMPPLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMPPLE LTD Ordinary has no effect on the direction of Crane i.e., Crane and SIMPPLE go up and down completely randomly.

Pair Corralation between Crane and SIMPPLE

Allowing for the 90-day total investment horizon Crane Company is expected to under-perform the SIMPPLE. But the stock apears to be less risky and, when comparing its historical volatility, Crane Company is 8.75 times less risky than SIMPPLE. The stock trades about -0.08 of its potential returns per unit of risk. The SIMPPLE LTD Ordinary is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  107.00  in SIMPPLE LTD Ordinary on September 10, 2024 and sell it today you would lose (13.00) from holding SIMPPLE LTD Ordinary or give up 12.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.24%
ValuesDaily Returns

Crane Company  vs.  SIMPPLE LTD Ordinary

 Performance 
       Timeline  
Crane Company 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 11 (%) 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.
SIMPPLE LTD Ordinary 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SIMPPLE LTD Ordinary are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, SIMPPLE disclosed solid returns over the last few months and may actually be approaching a breakup point.

Crane and SIMPPLE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Crane and SIMPPLE

The main advantage of trading using opposite Crane and SIMPPLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, SIMPPLE 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 SIMPPLE will offset losses from the drop in SIMPPLE's long position.
The idea behind Crane Company and SIMPPLE LTD Ordinary 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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