Correlation Between Crane NXT and Gates Industrial

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

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

Diversification Opportunities for Crane NXT and Gates Industrial

0.39

Correlation Coefficient

Crane NXT  Gates Industrial

Weak diversification

The 3 months correlation between Crane and Gates is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Crane NXT Co and Gates Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gates Industrial and Crane NXT 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 NXT Co are associated (or correlated) with Gates Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gates Industrial has no effect on the direction of Crane NXT i.e., Crane NXT and Gates Industrial go up and down completely randomly.

Pair Corralation between Crane NXT and Gates Industrial

Considering the 90-day investment horizon Crane NXT is expected to generate 2.11 times less return on investment than Gates Industrial. In addition to that, Crane NXT is 1.13 times more volatile than Gates Industrial. It trades about 0.11 of its total potential returns per unit of risk. Gates Industrial is currently generating about 0.25 per unit of volatility. If you would invest  1,723  in Gates Industrial on September 3, 2024 and sell it today you would earn a total of  493.00  from holding Gates Industrial or generate 28.61% return on investment over 90 days.

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

Crane NXT Co  vs.  Gates Industrial

Crane NXT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crane NXT Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Crane NXT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gates Industrial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gates Industrial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Gates Industrial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crane NXT and Gates Industrial

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

The idea behind Crane NXT Co and Gates Industrial 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 Stocks Directory module to find actively traded stocks across global markets.