Correlation Between Crane and Hillenbrand
Can any of the company-specific risk be diversified away by investing in both Crane and Hillenbrand 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 and Hillenbrand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and Hillenbrand, you can compare the effects of market volatilities on Crane and Hillenbrand 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 with a short position of Hillenbrand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Hillenbrand.
Diversification Opportunities for Crane and Hillenbrand
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Crane and Hillenbrand is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Hillenbrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillenbrand and Crane 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 Company are associated (or correlated) with Hillenbrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillenbrand has no effect on the direction of Crane i.e., Crane and Hillenbrand go up and down completely randomly.
Pair Corralation between Crane and Hillenbrand
Allowing for the 90-day total investment horizon Crane Company is expected to generate 1.06 times more return on investment than Hillenbrand. However, Crane is 1.06 times more volatile than Hillenbrand. It trades about 0.15 of its potential returns per unit of risk. Hillenbrand is currently generating about 0.03 per unit of risk. If you would invest 7,193 in Crane Company on January 26, 2024 and sell it today you would earn a total of 7,020 from holding Crane Company or generate 97.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crane Company vs. Hillenbrand
Performance |
| Timeline |
| Crane Company |
| Hillenbrand |
Crane and Hillenbrand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and Hillenbrand
The main advantage of trading using opposite Crane and Hillenbrand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, Hillenbrand 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 Hillenbrand will offset losses from the drop in Hillenbrand's long position.The idea behind Crane Company and Hillenbrand 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.| Hillenbrand vs. Nuburu Inc | Hillenbrand vs. Laser Photonics | Hillenbrand vs. Reelcause | Hillenbrand vs. Quality Industrial Corp |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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