Correlation Between Crane and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Crane and Pentair PLC 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 Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and Pentair PLC, you can compare the effects of market volatilities on Crane and Pentair PLC 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 Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Pentair PLC.
Diversification Opportunities for Crane and Pentair PLC
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Crane and Pentair is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Crane i.e., Crane and Pentair PLC go up and down completely randomly.
Pair Corralation between Crane and Pentair PLC
Allowing for the 90-day total investment horizon Crane Company is expected to generate 1.97 times more return on investment than Pentair PLC. However, Crane is 1.97 times more volatile than Pentair PLC. It trades about 0.41 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.37 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. Pentair PLC
Performance |
| Timeline |
| Crane Company |
| Pentair PLC |
Crane and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and Pentair PLC
The main advantage of trading using opposite Crane and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC's long position.| Crane vs. Standex International | Crane vs. Donaldson | Crane vs. CSW Industrials | Crane vs. Franklin Electric Co |
| Pentair PLC vs. Illinois Tool Works | Pentair PLC vs. Parker Hannifin | Pentair PLC vs. Emerson Electric | Pentair PLC vs. Smith AO |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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