Correlation Between Smith AO and Crane
Can any of the company-specific risk be diversified away by investing in both Smith AO 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 Smith AO and Crane into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith AO and Crane Company, you can compare the effects of market volatilities on Smith AO 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 Smith AO with a short position of Crane. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith AO and Crane.
Diversification Opportunities for Smith AO and Crane
Very good diversification
The 3 months correlation between Smith and Crane is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Smith AO and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and Smith AO 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 Smith AO 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 Smith AO i.e., Smith AO and Crane go up and down completely randomly.
Pair Corralation between Smith AO and Crane
Considering the 90-day investment horizon Smith AO is expected to under-perform the Crane. But the stock apears to be less risky and, when comparing its historical volatility, Smith AO is 1.32 times less risky than Crane. The stock trades about -0.22 of its potential returns per unit of risk. The Crane Company is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 15,737 in Crane Company on August 26, 2024 and sell it today you would earn a total of 2,699 from holding Crane Company or generate 17.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smith AO vs. Crane Company
Performance |
| Timeline |
| Smith AO |
| Crane Company |
Smith AO and Crane Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smith AO and Crane
The main advantage of trading using opposite Smith AO and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith AO 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.| Smith AO vs. Dover | Smith AO vs. Illinois Tool Works | Smith AO vs. Xylem Inc | Smith AO vs. Franklin Electric Co |
| Crane vs. Aquagold International | Crane vs. Morningstar Unconstrained Allocation | Crane vs. High Yield Municipal Fund | Crane vs. Thrivent High Yield |
Check out your portfolio center.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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