Correlation Between IDEX and Crane
Can any of the company-specific risk be diversified away by investing in both IDEX 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 IDEX and Crane into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and Crane Company, you can compare the effects of market volatilities on IDEX 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 IDEX with a short position of Crane. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Crane.
Diversification Opportunities for IDEX and Crane
Almost no diversification
The 3 months correlation between IDEX and Crane is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and IDEX 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 IDEX Corporation 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 IDEX i.e., IDEX and Crane go up and down completely randomly.
Pair Corralation between IDEX and Crane
Considering the 90-day investment horizon IDEX is expected to generate 121.5 times less return on investment than Crane. But when comparing it to its historical volatility, IDEX Corporation is 1.89 times less risky than Crane. It trades about 0.0 of its potential returns per unit of risk. Crane Company is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 10,530 in Crane Company on August 23, 2024 and sell it today you would earn a total of 7,786 from holding Crane Company or generate 73.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDEX Corp. vs. Crane Company
Performance |
| Timeline |
| IDEX |
| Crane Company |
IDEX and Crane Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Crane
The main advantage of trading using opposite IDEX and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX 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.The idea behind IDEX Corporation and Crane Company pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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