Correlation Between John Bean and Taylor Devices

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

Diversification Opportunities for John Bean and Taylor Devices

-0.63

Correlation Coefficient

John Bean  Taylor Devices

Excellent diversification

The 3 months correlation between John and Taylor is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding John Bean Technologies and Taylor Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taylor Devices 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 Taylor Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taylor Devices has no effect on the direction of John Bean i.e., John Bean and Taylor Devices go up and down completely randomly.

Pair Corralation between John Bean and Taylor Devices

Considering the 90-day investment horizon John Bean Technologies is expected to generate 0.65 times more return on investment than Taylor Devices. However, John Bean Technologies is 1.54 times less risky than Taylor Devices. It trades about 0.14 of its potential returns per unit of risk. Taylor Devices is currently generating about -0.06 per unit of risk. If you would invest  11,848  in John Bean Technologies on September 12, 2024 and sell it today you would earn a total of  653.00  from holding John Bean Technologies or generate 5.51% 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.  Taylor Devices

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 weak fundamental drivers, John Bean unveiled solid returns over the last few months and may actually be approaching a breakup point.

Taylor Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taylor Devices 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 Taylor Devices

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

The idea behind John Bean Technologies and Taylor Devices 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.