Correlation Between IDEX and Crane NXT
Can any of the company-specific risk be diversified away by investing in both IDEX 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 IDEX and Crane NXT 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 NXT Co, you can compare the effects of market volatilities on IDEX 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 IDEX with a short position of Crane NXT. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Crane NXT.
Diversification Opportunities for IDEX and Crane NXT
Good diversification
The 3 months correlation between IDEX and Crane is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Crane NXT Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane NXT 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 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 IDEX i.e., IDEX and Crane NXT go up and down completely randomly.
Pair Corralation between IDEX and Crane NXT
Considering the 90-day investment horizon IDEX is expected to generate 1.85 times less return on investment than Crane NXT. In addition to that, IDEX is 1.06 times more volatile than Crane NXT Co. It trades about 0.09 of its total potential returns per unit of risk. Crane NXT Co is currently generating about 0.18 per unit of volatility. If you would invest 5,553 in Crane NXT Co on October 26, 2024 and sell it today you would earn a total of 979.00 from holding Crane NXT Co or generate 17.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDEX Corp. vs. Crane NXT Co
Performance |
| Timeline |
| IDEX |
| Crane NXT |
IDEX and Crane NXT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Crane NXT
The main advantage of trading using opposite IDEX and Crane NXT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX 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.The idea behind IDEX Corporation and Crane NXT Co 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 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 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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