Correlation Between Crane and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Crane and Illinois Tool 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 Illinois Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and Illinois Tool Works, you can compare the effects of market volatilities on Crane and Illinois Tool 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 Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Illinois Tool.
Diversification Opportunities for Crane and Illinois Tool
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Crane and Illinois is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works 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 Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of Crane i.e., Crane and Illinois Tool go up and down completely randomly.
Pair Corralation between Crane and Illinois Tool
Allowing for the 90-day total investment horizon Crane Company is expected to generate 2.15 times more return on investment than Illinois Tool. However, Crane is 2.15 times more volatile than Illinois Tool Works. It trades about 0.06 of its potential returns per unit of risk. Illinois Tool Works is currently generating about 0.05 per unit of risk. If you would invest 10,076 in Crane Company on August 27, 2024 and sell it today you would earn a total of 8,360 from holding Crane Company or generate 82.97% 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. Illinois Tool Works
Performance |
| Timeline |
| Crane Company |
| Illinois Tool Works |
Crane and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and Illinois Tool
The main advantage of trading using opposite Crane and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, Illinois Tool 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 Illinois Tool will offset losses from the drop in Illinois Tool's long position.| Crane vs. Standex International | Crane vs. Donaldson | Crane vs. CSW Industrials | Crane vs. Franklin Electric Co |
| Illinois Tool vs. Aquagold International | Illinois Tool vs. Morningstar Unconstrained Allocation | Illinois Tool vs. High Yield Municipal Fund | Illinois Tool 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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