Correlation Between Crane and WEG SA

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

By analyzing existing cross correlation between Crane Company and WEG SA ADR, you can compare the effects of market volatilities on Crane and WEG SA 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 WEG SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and WEG SA.

Diversification Opportunities for Crane and WEG SA

-0.56

Correlation Coefficient

Crane  WEG SA

Excellent diversification

The 3 months correlation between Crane and WEG is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and WEG SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEG SA ADR 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 WEG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEG SA ADR has no effect on the direction of Crane i.e., Crane and WEG SA go up and down completely randomly.

Pair Corralation between Crane and WEG SA

Allowing for the 90-day total investment horizon Crane Company is expected to generate 1.03 times more return on investment than WEG SA. However, Crane is 1.03 times more volatile than WEG SA ADR. It trades about 0.12 of its potential returns per unit of risk. WEG SA ADR is currently generating about 0.0 per unit of risk. If you would invest  14,977  in Crane Company on September 12, 2024 and sell it today you would earn a total of  2,029  from holding Crane Company or generate 13.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Crane Company  vs.  WEG SA ADR

Crane Company

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 9 (%) 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.

WEG SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WEG SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, WEG SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Crane and WEG SA

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

The idea behind Crane Company and WEG SA ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.