Correlation Between Crane and Zurn Elkay
Can any of the company-specific risk be diversified away by investing in both Crane and Zurn Elkay 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 Zurn Elkay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and Zurn Elkay Water, you can compare the effects of market volatilities on Crane and Zurn Elkay 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 Zurn Elkay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Zurn Elkay.
Diversification Opportunities for Crane and Zurn Elkay
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Crane and Zurn is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Zurn Elkay Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurn Elkay Water 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 Zurn Elkay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zurn Elkay Water has no effect on the direction of Crane i.e., Crane and Zurn Elkay go up and down completely randomly.
Pair Corralation between Crane and Zurn Elkay
Allowing for the 90-day total investment horizon Crane Company is expected to generate 2.9 times more return on investment than Zurn Elkay. However, Crane is 2.9 times more volatile than Zurn Elkay Water. It trades about 0.21 of its potential returns per unit of risk. Zurn Elkay Water is currently generating about 0.24 per unit of risk. If you would invest 15,175 in Crane Company on November 1, 2024 and sell it today you would earn a total of 2,076 from holding Crane Company or generate 13.68% 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. Zurn Elkay Water
Performance |
| Timeline |
| Crane Company |
| Zurn Elkay Water |
Crane and Zurn Elkay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and Zurn Elkay
The main advantage of trading using opposite Crane and Zurn Elkay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, Zurn Elkay 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 Zurn Elkay will offset losses from the drop in Zurn Elkay's long position.| Crane vs. Standex International | Crane vs. Donaldson | Crane vs. CSW Industrials | Crane vs. Franklin Electric Co |
| Zurn Elkay vs. Energy Recovery | Zurn Elkay vs. CECO Environmental Corp | Zurn Elkay vs. 374Water Common Stock | Zurn Elkay vs. Federal Signal |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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