Correlation Between Graco and Crane

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

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

Diversification Opportunities for Graco and Crane

0.4

Correlation Coefficient

Graco  Crane

Very weak diversification

The 3 months correlation between Graco and Crane is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Graco Inc and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and Graco 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 Graco Inc are associated (or correlated) with Crane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crane Company has no effect on the direction of Graco i.e., Graco and Crane go up and down completely randomly.

Pair Corralation between Graco and Crane

Considering the 90-day investment horizon Graco is expected to generate 2.4 times less return on investment than Crane. But when comparing it to its historical volatility, Graco Inc is 1.96 times less risky than Crane. It trades about 0.02 of its potential returns per unit of risk. Crane Company is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  15,372  in Crane Company on December 27, 2024 and sell it today you would earn a total of  235.00  from holding Crane Company or generate 1.53% return on investment over 90 days.

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

Graco Inc  vs.  Crane Company

Graco Inc

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graco Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Graco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Crane Company

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Crane is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Graco and Crane

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

The idea behind Graco Inc and Crane 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.