Correlation Between Taylor Devices and John Bean

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

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

Diversification Opportunities for Taylor Devices and John Bean

-0.63

Correlation Coefficient

Taylor Devices  John Bean

Excellent diversification

The 3 months correlation between Taylor and John is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Taylor Devices 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 Taylor Devices 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 Taylor Devices 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 Taylor Devices i.e., Taylor Devices and John Bean go up and down completely randomly.

Pair Corralation between Taylor Devices and John Bean

Given the investment horizon of 90 days Taylor Devices is expected to under-perform the John Bean. In addition to that, Taylor Devices is 1.57 times more volatile than John Bean Technologies. It trades about -0.07 of its total potential returns per unit of risk. John Bean Technologies is currently generating about 0.21 per unit of volatility. If you would invest  8,723  in John Bean Technologies on September 12, 2024 and sell it today you would earn a total of  3,778  from holding John Bean Technologies or generate 43.31% return on investment over 90 days.

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

Taylor Devices  vs.  John Bean Technologies

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.

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.

Pair Trading with Taylor Devices and John Bean

The main advantage of trading using opposite Taylor Devices and John Bean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taylor Devices 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 Taylor Devices 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.