Correlation Between Erie Indemnity and Crawford

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

By analyzing existing cross correlation between Erie Indemnity and Crawford Company, you can compare the effects of market volatilities on Erie Indemnity and Crawford 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 Erie Indemnity with a short position of Crawford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erie Indemnity and Crawford.

Diversification Opportunities for Erie Indemnity and Crawford

-0.28

Correlation Coefficient

Erie Indemnity  Crawford

Very good diversification

The 3 months correlation between Erie and Crawford is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Erie Indemnity and Crawford Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crawford and Erie Indemnity 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 Erie Indemnity are associated (or correlated) with Crawford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crawford has no effect on the direction of Erie Indemnity i.e., Erie Indemnity and Crawford go up and down completely randomly.

Pair Corralation between Erie Indemnity and Crawford

Given the investment horizon of 90 days Erie Indemnity is expected to generate 0.78 times more return on investment than Crawford. However, Erie Indemnity is 1.29 times less risky than Crawford. It trades about 0.03 of its potential returns per unit of risk. Crawford Company is currently generating about -0.01 per unit of risk. If you would invest  40,999  in Erie Indemnity on December 29, 2024 and sell it today you would earn a total of  956.00  from holding Erie Indemnity or generate 2.33% return on investment over 90 days.

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

Erie Indemnity  vs.  Crawford Company

Erie Indemnity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erie Indemnity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Erie Indemnity is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Crawford

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crawford Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Crawford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Erie Indemnity and Crawford

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

The idea behind Erie Indemnity and Crawford Company 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.