Correlation Between Crane and NATIONAL HEALTHCARE

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

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

Diversification Opportunities for Crane and NATIONAL HEALTHCARE

0.78

Correlation Coefficient

Crane  NATIONAL HEALTHCARE

Poor diversification

The 3 months correlation between Crane and NATIONAL is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Crane Co and NATIONAL HEALTHCARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL HEALTHCARE 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 Co are associated (or correlated) with NATIONAL HEALTHCARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL HEALTHCARE has no effect on the direction of Crane i.e., Crane and NATIONAL HEALTHCARE go up and down completely randomly.

Pair Corralation between Crane and NATIONAL HEALTHCARE

Assuming the 90 days trading horizon Crane Co is expected to generate 1.14 times more return on investment than NATIONAL HEALTHCARE. However, Crane is 1.14 times more volatile than NATIONAL HEALTHCARE. It trades about -0.31 of its potential returns per unit of risk. NATIONAL HEALTHCARE is currently generating about -0.66 per unit of risk. If you would invest  16,600  in Crane Co on October 10, 2024 and sell it today you would lose (1,600) from holding Crane Co or give up 9.64% of portfolio value over 90 days.

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

Crane Co  vs.  NATIONAL HEALTHCARE

Crane

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Crane may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NATIONAL HEALTHCARE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NATIONAL HEALTHCARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Crane and NATIONAL HEALTHCARE

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

The idea behind Crane Co and NATIONAL HEALTHCARE 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.