Correlation Between CSW Industrials and Crane

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

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

Diversification Opportunities for CSW Industrials and Crane

0.85

Correlation Coefficient

CSW Industrials  Crane

Very poor diversification

The 3 months correlation between CSW and Crane is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding CSW Industrials and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and CSW Industrials 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 CSW Industrials 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 CSW Industrials i.e., CSW Industrials and Crane go up and down completely randomly.

Pair Corralation between CSW Industrials and Crane

Given the investment horizon of 90 days CSW Industrials is expected to generate 1.25 times more return on investment than Crane. However, CSW Industrials is 1.25 times more volatile than Crane Company. It trades about 0.2 of its potential returns per unit of risk. Crane Company is currently generating about 0.16 per unit of risk. If you would invest  31,526  in CSW Industrials on August 31, 2024 and sell it today you would earn a total of  10,197  from holding CSW Industrials or generate 32.34% return on investment over 90 days.

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

CSW Industrials  vs.  Crane Company

CSW Industrials

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CSW Industrials are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CSW Industrials demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Crane Company

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Crane reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSW Industrials and Crane

The main advantage of trading using opposite CSW Industrials and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSW Industrials 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 CSW Industrials 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.