Correlation Between Enpro Industries and Crane

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

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

Diversification Opportunities for Enpro Industries and Crane

-0.23

Correlation Coefficient

Enpro Industries  Crane

Very good diversification

The 3 months correlation between Enpro and Crane is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Enpro Industries and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company and Enpro Industries 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 Enpro Industries 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 Enpro Industries i.e., Enpro Industries and Crane go up and down completely randomly.

Pair Corralation between Enpro Industries and Crane

Considering the 90-day investment horizon Enpro Industries is expected to generate 1.55 times less return on investment than Crane. In addition to that, Enpro Industries is 1.08 times more volatile than Crane Company. It trades about 0.09 of its total potential returns per unit of risk. Crane Company is currently generating about 0.15 per unit of volatility. If you would invest  7,404  in Crane Company on February 16, 2024 and sell it today you would earn a total of  7,154  from holding Crane Company or generate 96.62% return on investment over 90 days.

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

Enpro Industries  vs.  Crane Company

Enpro Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enpro Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Crane Company

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crane Company are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Crane reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enpro Industries and Crane

The main advantage of trading using opposite Enpro Industries and Crane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enpro Industries 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 Enpro Industries 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.