Correlation Between Middleby Corp and Crane

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

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

Diversification Opportunities for Middleby Corp and Crane

0.45

Correlation Coefficient

Middleby Corp  Crane

Very weak diversification

The 3 months correlation between Middleby and Crane is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Middleby Corp and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and Middleby Corp 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 Middleby Corp 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 Middleby Corp i.e., Middleby Corp and Crane go up and down completely randomly.

Pair Corralation between Middleby Corp and Crane

Given the investment horizon of 90 days Middleby Corp is expected to under-perform the Crane. But the stock apears to be less risky and, when comparing its historical volatility, Middleby Corp is 1.06 times less risky than Crane. The stock trades about -0.03 of its potential returns per unit of risk. The Crane Company is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  15,841  in Crane Company on September 26, 2024 and sell it today you would lose (253.00) from holding Crane Company or give up 1.6% of portfolio value over 90 days.

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

Middleby Corp  vs.  Crane Company

Middleby Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Middleby Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Middleby Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Crane Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crane Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crane is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Middleby Corp and Crane

The main advantage of trading using opposite Middleby Corp and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middleby Corp 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 Middleby Corp 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.