Correlation Between John Bean and Tennant

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

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

Diversification Opportunities for John Bean and Tennant

-0.79

Correlation Coefficient

John Bean  Tennant

Pay attention - limited upside

The 3 months correlation between John and Tennant is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding John Bean Technologies and Tennant Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tennant Company and John Bean 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 John Bean Technologies are associated (or correlated) with Tennant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tennant Company has no effect on the direction of John Bean i.e., John Bean and Tennant go up and down completely randomly.

Pair Corralation between John Bean and Tennant

Considering the 90-day investment horizon John Bean Technologies is expected to generate 1.58 times more return on investment than Tennant. However, John Bean is 1.58 times more volatile than Tennant Company. It trades about 0.17 of its potential returns per unit of risk. Tennant Company is currently generating about -0.14 per unit of risk. If you would invest  9,843  in John Bean Technologies on September 29, 2024 and sell it today you would earn a total of  3,323  from holding John Bean Technologies or generate 33.76% return on investment over 90 days.

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

John Bean Technologies  vs.  Tennant Company

John Bean Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in John Bean Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, John Bean unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with John Bean and Tennant

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

The idea behind John Bean Technologies and Tennant 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.