Correlation Between Flowserve and Crane
Can any of the company-specific risk be diversified away by investing in both Flowserve and Crane 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 Flowserve and Crane into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flowserve and Crane Company, you can compare the effects of market volatilities on Flowserve and Crane 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 Flowserve with a short position of Crane. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flowserve and Crane.
Diversification Opportunities for Flowserve and Crane
Weak diversification
The 3 months correlation between Flowserve and Crane is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Flowserve and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and Flowserve 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 Flowserve are associated (or correlated) with Crane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crane Company has no effect on the direction of Flowserve i.e., Flowserve and Crane go up and down completely randomly.
Pair Corralation between Flowserve and Crane
Considering the 90-day investment horizon Flowserve is expected to generate 1.69 times less return on investment than Crane. But when comparing it to its historical volatility, Flowserve is 1.57 times less risky than Crane. It trades about 0.18 of its potential returns per unit of risk. Crane Company is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 15,366 in Crane Company on November 9, 2024 and sell it today you would earn a total of 1,913 from holding Crane Company or generate 12.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flowserve vs. Crane Company
Performance |
| Timeline |
| Flowserve |
| Crane Company |
Flowserve and Crane Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flowserve and Crane
The main advantage of trading using opposite Flowserve and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flowserve position performs unexpectedly, Crane 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 Crane will offset losses from the drop in Crane's long position.| Flowserve vs. IDEX Corporation | Flowserve vs. Donaldson | Flowserve vs. Ingersoll Rand | Flowserve vs. Franklin Electric Co |
| 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 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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