Correlation Between Crane NXT and Donaldson
Can any of the company-specific risk be diversified away by investing in both Crane NXT and Donaldson 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 NXT and Donaldson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane NXT Co and Donaldson, you can compare the effects of market volatilities on Crane NXT and Donaldson 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 NXT with a short position of Donaldson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane NXT and Donaldson.
Diversification Opportunities for Crane NXT and Donaldson
Good diversification
The 3 months correlation between Crane and Donaldson is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Crane NXT Co and Donaldson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donaldson and Crane NXT 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 NXT Co are associated (or correlated) with Donaldson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donaldson has no effect on the direction of Crane NXT i.e., Crane NXT and Donaldson go up and down completely randomly.
Pair Corralation between Crane NXT and Donaldson
Considering the 90-day investment horizon Crane NXT Co is expected to generate 1.76 times more return on investment than Donaldson. However, Crane NXT is 1.76 times more volatile than Donaldson. It trades about 0.18 of its potential returns per unit of risk. Donaldson is currently generating about 0.15 per unit of risk. If you would invest 5,487 in Crane NXT Co on August 24, 2024 and sell it today you would earn a total of 337.00 from holding Crane NXT Co or generate 6.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crane NXT Co vs. Donaldson
Performance |
| Timeline |
| Crane NXT |
| Donaldson |
Crane NXT and Donaldson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane NXT and Donaldson
The main advantage of trading using opposite Crane NXT and Donaldson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane NXT position performs unexpectedly, Donaldson 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 Donaldson will offset losses from the drop in Donaldson's long position.| Crane NXT vs. Donaldson | Crane NXT vs. ITT Inc | Crane NXT vs. Franklin Electric Co | Crane NXT vs. Enerpac Tool Group |
| Donaldson vs. IDEX Corporation | Donaldson vs. Watts Water Technologies | Donaldson vs. Gorman Rupp | Donaldson vs. Enerpac Tool Group |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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