Correlation Between IDEX and Tennant

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

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

Diversification Opportunities for IDEX and Tennant

0.24

Correlation Coefficient

IDEX  Tennant

Modest diversification

The 3 months correlation between IDEX and Tennant is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Tennant Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tennant Company and IDEX 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 IDEX Corporation 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 IDEX i.e., IDEX and Tennant go up and down completely randomly.

Pair Corralation between IDEX and Tennant

Considering the 90-day investment horizon IDEX Corporation is expected to under-perform the Tennant. But the stock apears to be less risky and, when comparing its historical volatility, IDEX Corporation is 1.36 times less risky than Tennant. The stock trades about -0.01 of its potential returns per unit of risk. The Tennant Company is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,613  in Tennant Company on October 12, 2024 and sell it today you would earn a total of  1,388  from holding Tennant Company or generate 20.99% return on investment over 90 days.

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

IDEX Corp.  vs.  Tennant Company

IDEX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDEX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, IDEX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with IDEX and Tennant

The main advantage of trading using opposite IDEX and Tennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX 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 IDEX Corporation 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.

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 the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.