Correlation Between Crane and Vanguard Industrials
Can any of the company-specific risk be diversified away by investing in both Crane and Vanguard Industrials 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 Vanguard Industrials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and Vanguard Industrials Index, you can compare the effects of market volatilities on Crane and Vanguard Industrials 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 Vanguard Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Vanguard Industrials.
Diversification Opportunities for Crane and Vanguard Industrials
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Crane and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Vanguard Industrials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Industrials 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 Vanguard Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Industrials has no effect on the direction of Crane i.e., Crane and Vanguard Industrials go up and down completely randomly.
Pair Corralation between Crane and Vanguard Industrials
Allowing for the 90-day total investment horizon Crane Company is expected to generate 1.67 times more return on investment than Vanguard Industrials. However, Crane is 1.67 times more volatile than Vanguard Industrials Index. It trades about 0.46 of its potential returns per unit of risk. Vanguard Industrials Index is currently generating about 0.26 per unit of risk. If you would invest 15,239 in Crane Company on August 28, 2024 and sell it today you would earn a total of 3,241 from holding Crane Company or generate 21.27% 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. Vanguard Industrials Index
Performance |
| Timeline |
| Crane Company |
| Vanguard Industrials |
Crane and Vanguard Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and Vanguard Industrials
The main advantage of trading using opposite Crane and Vanguard Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, Vanguard Industrials 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 Vanguard Industrials will offset losses from the drop in Vanguard Industrials' long position.| Crane vs. Standex International | Crane vs. Donaldson | Crane vs. CSW Industrials | Crane vs. Franklin Electric 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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