Correlation Between Crane and Steel Partners
Can any of the company-specific risk be diversified away by investing in both Crane and Steel Partners 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 Steel Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and Steel Partners Holdings, you can compare the effects of market volatilities on Crane and Steel Partners 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 Steel Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Steel Partners.
Diversification Opportunities for Crane and Steel Partners
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Crane and Steel is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Steel Partners Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Partners Holdings 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 Steel Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Partners Holdings has no effect on the direction of Crane i.e., Crane and Steel Partners go up and down completely randomly.
Pair Corralation between Crane and Steel Partners
Allowing for the 90-day total investment horizon Crane Company is expected to generate 6.05 times more return on investment than Steel Partners. However, Crane is 6.05 times more volatile than Steel Partners Holdings. It trades about 0.06 of its potential returns per unit of risk. Steel Partners Holdings is currently generating about 0.09 per unit of risk. If you would invest 10,185 in Crane Company on August 24, 2024 and sell it today you would earn a total of 8,251 from holding Crane Company or generate 81.01% 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. Steel Partners Holdings
Performance |
| Timeline |
| Crane Company |
| Steel Partners Holdings |
Crane and Steel Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and Steel Partners
The main advantage of trading using opposite Crane and Steel Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, Steel Partners 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 Steel Partners will offset losses from the drop in Steel Partners' long position.| Crane vs. Standex International | Crane vs. Donaldson | Crane vs. CSW Industrials | Crane vs. Franklin Electric Co |
| Steel Partners vs. Compass Diversified | Steel Partners vs. Brookfield Business Partners | Steel Partners vs. Matthews International | Steel Partners vs. Tejon Ranch Co |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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