Correlation Between Hillenbrand and Crane

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

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

Diversification Opportunities for Hillenbrand and Crane

0.74

Correlation Coefficient

Hillenbrand  Crane

Poor diversification

The 3 months correlation between Hillenbrand and Crane is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hillenbrand and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and Hillenbrand 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 Hillenbrand 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 Hillenbrand i.e., Hillenbrand and Crane go up and down completely randomly.

Pair Corralation between Hillenbrand and Crane

Allowing for the 90-day total investment horizon Hillenbrand is expected to generate 2.31 times less return on investment than Crane. In addition to that, Hillenbrand is 1.59 times more volatile than Crane Company. It trades about 0.03 of its total potential returns per unit of risk. Crane Company is currently generating about 0.12 per unit of volatility. If you would invest  15,838  in Crane Company on August 30, 2024 and sell it today you would earn a total of  2,322  from holding Crane Company or generate 14.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Hillenbrand  vs.  Crane Company

Hillenbrand

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hillenbrand are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Hillenbrand may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Crane Company

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Crane reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hillenbrand and Crane

The main advantage of trading using opposite Hillenbrand and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hillenbrand 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 Hillenbrand 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.