Correlation Between Graham and John Bean

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

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

Diversification Opportunities for Graham and John Bean

0.79

Correlation Coefficient

Graham  John Bean

Poor diversification

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

Pair Corralation between Graham and John Bean

Considering the 90-day investment horizon Graham is expected to generate 1.2 times more return on investment than John Bean. However, Graham is 1.2 times more volatile than John Bean Technologies. It trades about 0.08 of its potential returns per unit of risk. John Bean Technologies is currently generating about 0.08 per unit of risk. If you would invest  3,292  in Graham on September 21, 2024 and sell it today you would earn a total of  768.00  from holding Graham or generate 23.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.07%
Values	Daily Returns

Graham  vs.  John Bean Technologies

Graham

Risk-Adjusted Performance

11 of 100

Good

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

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.

Pair Trading with Graham and John Bean

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

The idea behind Graham and John Bean Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.