Correlation Between ITT and Crane NXT

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

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

Diversification Opportunities for ITT and Crane NXT

-0.21

Correlation Coefficient

ITT  Crane NXT

Very good diversification

The 3 months correlation between ITT and Crane is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding ITT Inc and Crane NXT Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane NXT and ITT 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 ITT Inc are associated (or correlated) with Crane NXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crane NXT has no effect on the direction of ITT i.e., ITT and Crane NXT go up and down completely randomly.

Pair Corralation between ITT and Crane NXT

Considering the 90-day investment horizon ITT Inc is expected to generate 0.84 times more return on investment than Crane NXT. However, ITT Inc is 1.19 times less risky than Crane NXT. It trades about 0.1 of its potential returns per unit of risk. Crane NXT Co is currently generating about 0.07 per unit of risk. If you would invest  8,457  in ITT Inc on August 24, 2024 and sell it today you would earn a total of  7,381  from holding ITT Inc or generate 87.28% return on investment over 90 days.

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

ITT Inc  vs.  Crane NXT Co

ITT Inc

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITT Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, ITT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Crane NXT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crane NXT Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Crane NXT is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ITT and Crane NXT

The main advantage of trading using opposite ITT and Crane NXT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITT position performs unexpectedly, Crane NXT 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 NXT will offset losses from the drop in Crane NXT's long position.

The idea behind ITT Inc and Crane NXT Co 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.