Correlation Between Cisco Systems and Crane Holdings

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Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Crane Holdings 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 Cisco Systems and Crane Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Crane Holdings CO, you can compare the effects of market volatilities on Cisco Systems and Crane Holdings 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 Cisco Systems with a short position of Crane Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Crane Holdings.

Diversification Opportunities for Cisco Systems and Crane Holdings

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Cisco and Crane is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Crane Holdings CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Holdings CO and Cisco Systems 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 Cisco Systems are associated (or correlated) with Crane Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crane Holdings CO has no effect on the direction of Cisco Systems i.e., Cisco Systems and Crane Holdings go up and down completely randomly.

Pair Corralation between Cisco Systems and Crane Holdings

Given the investment horizon of 90 days Cisco Systems is expected to generate 5.39 times less return on investment than Crane Holdings. But when comparing it to its historical volatility, Cisco Systems is 1.31 times less risky than Crane Holdings. It trades about 0.02 of its potential returns per unit of risk. Crane Holdings CO is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,291  in Crane Holdings CO on July 8, 2022 and sell it today you would earn a total of  4,197  from holding Crane Holdings CO or generate 79.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.8%
ValuesDaily Returns

Cisco Systems  vs.  Crane Holdings CO

 Performance (%) 
       Timeline  
Cisco Systems 
Cisco Performance
0 of 100
Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Cisco Systems is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Cisco Price Channel

Crane Holdings CO 
Crane Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Crane Holdings CO are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Crane Holdings may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Crane Price Channel

Cisco Systems and Crane Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and Crane Holdings

The main advantage of trading using opposite Cisco Systems and Crane Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Crane Holdings 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 Holdings will offset losses from the drop in Crane Holdings' long position.
Cisco Systems vs. Amazon Inc
The idea behind Cisco Systems and Crane Holdings 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.
Crane Holdings vs. Amazon Inc
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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