Correlation Between Gates Industrial and Crane NXT
Can any of the company-specific risk be diversified away by investing in both Gates Industrial and Crane NXT 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 Gates Industrial and Crane NXT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gates Industrial and Crane NXT Co, you can compare the effects of market volatilities on Gates Industrial and Crane NXT 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 Gates Industrial with a short position of Crane NXT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gates Industrial and Crane NXT.
Diversification Opportunities for Gates Industrial and Crane NXT
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gates and Crane is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Gates Industrial and Crane NXT Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane NXT and Gates Industrial 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 Gates Industrial are associated (or correlated) with Crane NXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crane NXT has no effect on the direction of Gates Industrial i.e., Gates Industrial and Crane NXT go up and down completely randomly.
Pair Corralation between Gates Industrial and Crane NXT
Given the investment horizon of 90 days Gates Industrial is expected to generate 1.25 times more return on investment than Crane NXT. However, Gates Industrial is 1.25 times more volatile than Crane NXT Co. It trades about 0.4 of its potential returns per unit of risk. Crane NXT Co is currently generating about 0.18 per unit of risk. If you would invest 1,855 in Gates Industrial on August 24, 2024 and sell it today you would earn a total of 344.00 from holding Gates Industrial or generate 18.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gates Industrial vs. Crane NXT Co
Performance |
| Timeline |
| Gates Industrial |
| Crane NXT |
Gates Industrial and Crane NXT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gates Industrial and Crane NXT
The main advantage of trading using opposite Gates Industrial and Crane NXT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gates Industrial position performs unexpectedly, Crane NXT 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 NXT will offset losses from the drop in Crane NXT's long position.| Gates Industrial vs. Crane NXT Co | Gates Industrial vs. Donaldson | Gates Industrial vs. ITT Inc | Gates Industrial vs. Franklin Electric Co |
| Crane NXT vs. Donaldson | Crane NXT vs. ITT Inc | Crane NXT vs. Franklin Electric Co | Crane NXT 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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