Correlation Between Tennant and Crane

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

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

Diversification Opportunities for Tennant and Crane

-0.44

Correlation Coefficient

Tennant  Crane

Very good diversification

The 3 months correlation between Tennant and Crane is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Tennant Company and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and Tennant 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 Tennant Company 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 Tennant i.e., Tennant and Crane go up and down completely randomly.

Pair Corralation between Tennant and Crane

Considering the 90-day investment horizon Tennant Company is expected to under-perform the Crane. But the stock apears to be less risky and, when comparing its historical volatility, Tennant Company is 1.01 times less risky than Crane. The stock trades about -0.05 of its potential returns per unit of risk. The Crane Company is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  15,073  in Crane Company on September 2, 2024 and sell it today you would earn a total of  3,135  from holding Crane Company or generate 20.8% return on investment over 90 days.

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

Tennant Company  vs.  Crane Company

Tennant Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Tennant and Crane

The main advantage of trading using opposite Tennant and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tennant 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 Tennant Company 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.