Correlation Between John Bean and Dover

Can any of the company-specific risk be diversified away by investing in both John Bean and Dover 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 Dover 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 Dover, you can compare the effects of market volatilities on John Bean and Dover 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 Dover. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Bean and Dover.

Diversification Opportunities for John Bean and Dover

0.81

Correlation Coefficient

John Bean  Dover

Very poor diversification

The 3 months correlation between John and Dover is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding John Bean Technologies and Dover in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dover 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 Dover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dover has no effect on the direction of John Bean i.e., John Bean and Dover go up and down completely randomly.

Pair Corralation between John Bean and Dover

Considering the 90-day investment horizon John Bean Technologies is expected to generate 2.15 times more return on investment than Dover. However, John Bean is 2.15 times more volatile than Dover. It trades about 0.2 of its potential returns per unit of risk. Dover is currently generating about 0.16 per unit of risk. If you would invest  8,754  in John Bean Technologies on September 3, 2024 and sell it today you would earn a total of  3,763  from holding John Bean Technologies or generate 42.99% return on investment over 90 days.

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

John Bean Technologies  vs.  Dover

John Bean Technologies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in John Bean Technologies are ranked lower than 16 (%) 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.

Dover

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dover are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Dover showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with John Bean and Dover

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

The idea behind John Bean Technologies and Dover 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.