Correlation Between Crane and IDEX

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Can any of the company-specific risk be diversified away by investing in both Crane and IDEX 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 IDEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and IDEX Corporation, you can compare the effects of market volatilities on Crane and IDEX 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 IDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and IDEX.

Diversification Opportunities for Crane and IDEX

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Crane and IDEX is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX 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 IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of Crane i.e., Crane and IDEX go up and down completely randomly.

Pair Corralation between Crane and IDEX

Allowing for the 90-day total investment horizon Crane Company is expected to generate 1.27 times more return on investment than IDEX. However, Crane is 1.27 times more volatile than IDEX Corporation. It trades about 0.2 of its potential returns per unit of risk. IDEX Corporation is currently generating about -0.08 per unit of risk. If you would invest  15,366  in Crane Company on November 9, 2024 and sell it today you would earn a total of  1,913  from holding Crane Company or generate 12.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Crane Company  vs.  IDEX Corp.

 Performance 
       Timeline  
Crane Company 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Crane Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crane is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.
IDEX 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days IDEX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Crane and IDEX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Crane and IDEX

The main advantage of trading using opposite Crane and IDEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, IDEX 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 IDEX will offset losses from the drop in IDEX's long position.
The idea behind Crane Company and IDEX Corporation 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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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