Correlation Between IDEX and John Bean
Can any of the company-specific risk be diversified away by investing in both IDEX 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 IDEX and John Bean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and John Bean Technologies, you can compare the effects of market volatilities on IDEX 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 IDEX with a short position of John Bean. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and John Bean.
Diversification Opportunities for IDEX and John Bean
Very poor diversification
The 3 months correlation between IDEX and John is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding IDEX 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 IDEX 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 IDEX Corporation 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 IDEX i.e., IDEX and John Bean go up and down completely randomly.
Pair Corralation between IDEX and John Bean
Considering the 90-day investment horizon IDEX Corporation is expected to generate 0.96 times more return on investment than John Bean. However, IDEX Corporation is 1.05 times less risky than John Bean. It trades about 0.28 of its potential returns per unit of risk. John Bean Technologies is currently generating about 0.08 per unit of risk. If you would invest 20,484 in IDEX Corporation on August 27, 2024 and sell it today you would earn a total of 2,766 from holding IDEX Corporation or generate 13.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDEX Corp. vs. John Bean Technologies
Performance |
| Timeline |
| IDEX |
| John Bean Technologies |
IDEX and John Bean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and John Bean
The main advantage of trading using opposite IDEX and John Bean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX 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 IDEX Corporation 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.| John Bean vs. Flowserve | John Bean vs. Franklin Electric Co | John Bean vs. ITT Inc | John Bean vs. IDEX Corporation |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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