Correlation Between Crane NXT and Ocean Power

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

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

Diversification Opportunities for Crane NXT and Ocean Power

-0.65

Correlation Coefficient

Crane NXT  Ocean Power

Excellent diversification

The 3 months correlation between Crane and Ocean is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Crane NXT Co and Ocean Power Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Power Technologies and Crane NXT 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 NXT Co are associated (or correlated) with Ocean Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Power Technologies has no effect on the direction of Crane NXT i.e., Crane NXT and Ocean Power go up and down completely randomly.

Pair Corralation between Crane NXT and Ocean Power

Considering the 90-day investment horizon Crane NXT Co is expected to generate 0.4 times more return on investment than Ocean Power. However, Crane NXT Co is 2.51 times less risky than Ocean Power. It trades about 0.09 of its potential returns per unit of risk. Ocean Power Technologies is currently generating about -0.05 per unit of risk. If you would invest  3,083  in Crane NXT Co on February 8, 2024 and sell it today you would earn a total of  3,185  from holding Crane NXT Co or generate 103.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Crane NXT Co  vs.  Ocean Power Technologies

Crane NXT

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crane NXT Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Crane NXT may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Ocean Power Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean Power Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Crane NXT and Ocean Power

The main advantage of trading using opposite Crane NXT and Ocean Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane NXT position performs unexpectedly, Ocean Power 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 Ocean Power will offset losses from the drop in Ocean Power's long position.

The idea behind Crane NXT Co and Ocean Power Technologies 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.