Correlation Between Crane and Flowserve
Can any of the company-specific risk be diversified away by investing in both Crane and Flowserve 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 Flowserve into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and Flowserve, you can compare the effects of market volatilities on Crane and Flowserve 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 Flowserve. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Flowserve.
Diversification Opportunities for Crane and Flowserve
Almost no diversification
The 3 months correlation between Crane and Flowserve is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve 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 Flowserve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowserve has no effect on the direction of Crane i.e., Crane and Flowserve go up and down completely randomly.
Pair Corralation between Crane and Flowserve
Allowing for the 90-day total investment horizon Crane is expected to generate 1.06 times less return on investment than Flowserve. In addition to that, Crane is 1.47 times more volatile than Flowserve. It trades about 0.06 of its total potential returns per unit of risk. Flowserve is currently generating about 0.1 per unit of volatility. If you would invest 2,904 in Flowserve on August 28, 2024 and sell it today you would earn a total of 3,281 from holding Flowserve or generate 112.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crane Company vs. Flowserve
Performance |
| Timeline |
| Crane Company |
| Flowserve |
Crane and Flowserve Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and Flowserve
The main advantage of trading using opposite Crane and Flowserve positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, Flowserve 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 Flowserve will offset losses from the drop in Flowserve's long position.| Crane vs. Standex International | Crane vs. Donaldson | Crane vs. CSW Industrials | Crane vs. Franklin Electric Co |
| Flowserve vs. Aquagold International | Flowserve vs. Morningstar Unconstrained Allocation | Flowserve vs. High Yield Municipal Fund | Flowserve 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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