Correlation Between Crane and NL Industries
Can any of the company-specific risk be diversified away by investing in both Crane and NL 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 NL 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 NL Industries, you can compare the effects of market volatilities on Crane and NL 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and NL Industries.
Diversification Opportunities for Crane and NL Industries
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Crane and NL Industries is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Crane i.e., Crane and NL Industries go up and down completely randomly.
Pair Corralation between Crane and NL Industries
Allowing for the 90-day total investment horizon Crane is expected to generate 1.14 times less return on investment than NL Industries. But when comparing it to its historical volatility, Crane Company is 1.68 times less risky than NL Industries. It trades about 0.13 of its potential returns per unit of risk. NL Industries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 463.00 in NL Industries on August 26, 2024 and sell it today you would earn a total of 348.00 from holding NL Industries or generate 75.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crane Company vs. NL Industries
Performance |
| Timeline |
| Crane Company |
| NL Industries |
Crane and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and NL Industries
The main advantage of trading using opposite Crane and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, NL 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 NL Industries will offset losses from the drop in NL Industries' long position.| Crane vs. Aquagold International | Crane vs. Morningstar Unconstrained Allocation | Crane vs. High Yield Municipal Fund | Crane vs. Thrivent High Yield |
| NL Industries vs. Park Electrochemical | NL Industries vs. Innovative Solutions and | NL Industries vs. Curtiss Wright | NL Industries vs. National Presto Industries |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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