Correlation Between John Bean and Kadant

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

Diversification Opportunities for John Bean and Kadant

0.76

Correlation Coefficient

John Bean  Kadant

Poor diversification

The 3 months correlation between John and Kadant is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding John Bean Technologies and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc 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 Kadant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kadant Inc has no effect on the direction of John Bean i.e., John Bean and Kadant go up and down completely randomly.

Pair Corralation between John Bean and Kadant

Considering the 90-day investment horizon John Bean Technologies is expected to generate 1.14 times more return on investment than Kadant. However, John Bean is 1.14 times more volatile than Kadant Inc. It trades about 0.08 of its potential returns per unit of risk. Kadant Inc is currently generating about 0.02 per unit of risk. If you would invest  10,226  in John Bean Technologies on September 21, 2024 and sell it today you would earn a total of  2,187  from holding John Bean Technologies or generate 21.39% return on investment over 90 days.

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

John Bean Technologies  vs.  Kadant Inc

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.

Kadant Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kadant Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Kadant is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with John Bean and Kadant

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

The idea behind John Bean Technologies and Kadant Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..