Correlation Between Crane and SIMPPLE
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
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 is expected to generate 2.75 times less return on investment than SIMPPLE. But when comparing it to its historical volatility, Crane Company is 7.12 times less risky than SIMPPLE. It trades about 0.06 of its potential returns per unit of risk. SIMPPLE LTD Ordinary is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 490.00 in SIMPPLE LTD Ordinary on September 6, 2024 and sell it today you would lose (395.00) from holding SIMPPLE LTD Ordinary or give up 80.61% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 62.83% |
Values | Daily Returns |
Crane Company vs. SIMPPLE LTD Ordinary
Performance |
Timeline |
Crane Company |
SIMPPLE LTD Ordinary |
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.Crane vs. Standex International | Crane vs. Donaldson | Crane vs. CSW Industrials | Crane vs. Franklin Electric Co |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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