Correlation Between Crane and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Crane and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and Dow Jones Industrial, you can compare the effects of market volatilities on Crane and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Dow Jones.
Diversification Opportunities for Crane and Dow Jones
Very poor diversification
The 3 months correlation between Crane and Dow is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Crane i.e., Crane and Dow Jones go up and down completely randomly.
Pair Corralation between Crane and Dow Jones
Allowing for the 90-day total investment horizon Crane Company is expected to generate 2.18 times more return on investment than Dow Jones. However, Crane is 2.18 times more volatile than Dow Jones Industrial. It trades about 0.41 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 per unit of risk. If you would invest 15,180 in Crane Company on August 24, 2024 and sell it today you would earn a total of 3,136 from holding Crane Company or generate 20.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crane Company vs. Dow Jones Industrial
Performance |
| Timeline |
Crane and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Crane Company
Pair trading matchups for Crane
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Crane and Dow Jones
The main advantage of trading using opposite Crane and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Crane vs. Standex International | Crane vs. Donaldson | Crane vs. CSW Industrials | Crane vs. Franklin Electric Co |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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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