Correlation Between Middleby Corp and John Bean

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

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

Diversification Opportunities for Middleby Corp and John Bean

0.35

Correlation Coefficient

Middleby Corp  John Bean

Weak diversification

The 3 months correlation between Middleby and John is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Middleby Corp 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 Middleby Corp 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 Middleby Corp 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 Middleby Corp i.e., Middleby Corp and John Bean go up and down completely randomly.

Pair Corralation between Middleby Corp and John Bean

Given the investment horizon of 90 days Middleby Corp is expected to under-perform the John Bean. But the stock apears to be less risky and, when comparing its historical volatility, Middleby Corp is 1.21 times less risky than John Bean. The stock trades about -0.02 of its potential returns per unit of risk. The John Bean Technologies is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  11,558  in John Bean Technologies on October 6, 2024 and sell it today you would earn a total of  974.00  from holding John Bean Technologies or generate 8.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Middleby Corp  vs.  John Bean Technologies

Middleby Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Middleby Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Middleby Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

John Bean Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in John Bean Technologies are ranked lower than 10 (%) 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 Middleby Corp and John Bean

The main advantage of trading using opposite Middleby Corp and John Bean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middleby Corp 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 Middleby Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.