Correlation Between Crane NXT and Middleby Corp

Can any of the company-specific risk be diversified away by investing in both Crane NXT 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 NXT 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 NXT Co and Middleby Corp, you can compare the effects of market volatilities on Crane NXT 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 NXT with a short position of Middleby Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane NXT and Middleby Corp.

Diversification Opportunities for Crane NXT and Middleby Corp

0.09

Correlation Coefficient

Crane NXT  Middleby Corp

Significant diversification

The 3 months correlation between Crane and Middleby is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Crane NXT Co and Middleby Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middleby Corp 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 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 NXT i.e., Crane NXT and Middleby Corp go up and down completely randomly.

Pair Corralation between Crane NXT and Middleby Corp

Considering the 90-day investment horizon Crane NXT Co is expected to under-perform the Middleby Corp. But the stock apears to be less risky and, when comparing its historical volatility, Crane NXT Co is 1.56 times less risky than Middleby Corp. The stock trades about -0.12 of its potential returns per unit of risk. The Middleby Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  14,206  in Middleby Corp on December 1, 2024 and sell it today you would earn a total of  2,335  from holding Middleby Corp or generate 16.44% return on investment over 90 days.

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

Crane NXT Co  vs.  Middleby Corp

Crane NXT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crane NXT Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Middleby Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Middleby Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Middleby Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crane NXT and Middleby Corp

The main advantage of trading using opposite Crane NXT and Middleby Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane NXT 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 NXT Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.