Correlation Between Ametek and Crane

Can any of the company-specific risk be diversified away by investing in both Ametek 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 Ametek and Crane into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ametek Inc and Crane Company, you can compare the effects of market volatilities on Ametek 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 Ametek with a short position of Crane. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ametek and Crane.

Diversification Opportunities for Ametek and Crane

0.76

Correlation Coefficient

Ametek  Crane

Poor diversification

The 3 months correlation between Ametek and Crane is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ametek Inc and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and Ametek 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 Ametek Inc 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 Ametek i.e., Ametek and Crane go up and down completely randomly.

Pair Corralation between Ametek and Crane

Considering the 90-day investment horizon Ametek is expected to generate 2.19 times less return on investment than Crane. But when comparing it to its historical volatility, Ametek Inc is 2.3 times less risky than Crane. It trades about 0.18 of its potential returns per unit of risk. Crane Company is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  11,344  in Crane Company on January 25, 2024 and sell it today you would earn a total of  2,467  from holding Crane Company or generate 21.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ametek Inc  vs.  Crane Company

Ametek Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal primary indicators, Ametek may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Crane Company

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Crane reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ametek and Crane

The main advantage of trading using opposite Ametek and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ametek 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 Ametek Inc 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.