Correlation Between Crane and CEA Industries
Can any of the company-specific risk be diversified away by investing in both Crane and CEA Industries 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 Crane and CEA Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and CEA Industries, you can compare the effects of market volatilities on Crane and CEA Industries 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 Crane with a short position of CEA Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and CEA Industries.
Diversification Opportunities for Crane and CEA Industries
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Crane and CEA is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and CEA Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries and Crane 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 Crane Company are associated (or correlated) with CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries has no effect on the direction of Crane i.e., Crane and CEA Industries go up and down completely randomly.
Pair Corralation between Crane and CEA Industries
Allowing for the 90-day total investment horizon Crane Company is expected to generate 0.32 times more return on investment than CEA Industries. However, Crane Company is 3.13 times less risky than CEA Industries. It trades about 0.1 of its potential returns per unit of risk. CEA Industries is currently generating about -0.04 per unit of risk. If you would invest 15,253 in Crane Company on October 20, 2024 and sell it today you would earn a total of 347.00 from holding Crane Company or generate 2.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Crane Company vs. CEA Industries
Performance |
| Timeline |
| Crane Company |
| CEA Industries |
Crane and CEA Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and CEA Industries
The main advantage of trading using opposite Crane and CEA Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, CEA Industries 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 CEA Industries will offset losses from the drop in CEA Industries' long position.| Crane vs. Standex International | Crane vs. Donaldson | Crane vs. CSW Industrials | Crane vs. Franklin Electric Co |
| CEA Industries vs. Rev Group | CEA Industries vs. Caterpillar | CEA Industries vs. Buhler Industries | CEA Industries vs. Austin Engineering Limited |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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