Correlation Between Crane and Nuscale Power

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

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

Diversification Opportunities for Crane and Nuscale Power

0.86

Correlation Coefficient

Crane  Nuscale Power

Very poor diversification

The 3 months correlation between Crane and Nuscale is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Nuscale Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuscale Power Corp 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 Nuscale Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuscale Power Corp has no effect on the direction of Crane i.e., Crane and Nuscale Power go up and down completely randomly.

Pair Corralation between Crane and Nuscale Power

Allowing for the 90-day total investment horizon Crane is expected to generate 6.51 times less return on investment than Nuscale Power. But when comparing it to its historical volatility, Crane Company is 4.51 times less risky than Nuscale Power. It trades about 0.19 of its potential returns per unit of risk. Nuscale Power Corp is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,201  in Nuscale Power Corp on September 3, 2024 and sell it today you would earn a total of  1,764  from holding Nuscale Power Corp or generate 146.88% return on investment over 90 days.

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

Crane Company  vs.  Nuscale Power Corp

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.

Nuscale Power Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuscale Power Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, Nuscale Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crane and Nuscale Power

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

The idea behind Crane Company and Nuscale Power Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .