Correlation Between Luxfer Holdings and Crane

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

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

Diversification Opportunities for Luxfer Holdings and Crane

0.87

Correlation Coefficient

Luxfer Holdings  Crane

Very poor diversification

The 3 months correlation between Luxfer and Crane is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and Luxfer Holdings 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 Luxfer Holdings PLC 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 Luxfer Holdings i.e., Luxfer Holdings and Crane go up and down completely randomly.

Pair Corralation between Luxfer Holdings and Crane

Given the investment horizon of 90 days Luxfer Holdings PLC is expected to under-perform the Crane. In addition to that, Luxfer Holdings is 1.53 times more volatile than Crane Company. It trades about -0.12 of its total potential returns per unit of risk. Crane Company is currently generating about 0.06 per unit of volatility. If you would invest  17,367  in Crane Company on September 8, 2024 and sell it today you would earn a total of  270.00  from holding Crane Company or generate 1.55% return on investment over 90 days.

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

Luxfer Holdings PLC  vs.  Crane Company

Luxfer Holdings PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Crane Company

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 14 (%) 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 Luxfer Holdings and Crane

The main advantage of trading using opposite Luxfer Holdings and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luxfer Holdings 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 Luxfer Holdings PLC 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.