Correlation Between Middleby Corp and Crane NXT

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

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

Diversification Opportunities for Middleby Corp and Crane NXT

0.61

Correlation Coefficient

Middleby Corp  Crane NXT

Poor diversification

The 3 months correlation between Middleby and Crane is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Middleby Corp and Crane NXT Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane NXT and Middleby Corp 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 Middleby Corp are associated (or correlated) with Crane NXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crane NXT has no effect on the direction of Middleby Corp i.e., Middleby Corp and Crane NXT go up and down completely randomly.

Pair Corralation between Middleby Corp and Crane NXT

Given the investment horizon of 90 days Middleby Corp is expected to generate 2.59 times less return on investment than Crane NXT. In addition to that, Middleby Corp is 1.08 times more volatile than Crane NXT Co. It trades about 0.04 of its total potential returns per unit of risk. Crane NXT Co is currently generating about 0.11 per unit of volatility. If you would invest  5,633  in Crane NXT Co on September 4, 2024 and sell it today you would earn a total of  688.00  from holding Crane NXT Co or generate 12.21% return on investment over 90 days.

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

Middleby Corp  vs.  Crane NXT Co

Middleby Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Middleby Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Middleby Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Crane NXT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crane NXT Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Crane NXT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Middleby Corp and Crane NXT

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

The idea behind Middleby Corp and Crane NXT Co 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.