Correlation Between ITT and Tennant
Can any of the company-specific risk be diversified away by investing in both ITT and Tennant 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 ITT and Tennant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITT Inc and Tennant Company, you can compare the effects of market volatilities on ITT and Tennant 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 ITT with a short position of Tennant. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITT and Tennant.
Diversification Opportunities for ITT and Tennant
Very weak diversification
The 3 months correlation between ITT and Tennant is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ITT Inc and Tennant Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tennant Company and ITT 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 ITT Inc are associated (or correlated) with Tennant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tennant Company has no effect on the direction of ITT i.e., ITT and Tennant go up and down completely randomly.
Pair Corralation between ITT and Tennant
Considering the 90-day investment horizon ITT is expected to generate 1.19 times less return on investment than Tennant. In addition to that, ITT is 1.14 times more volatile than Tennant Company. It trades about 0.21 of its total potential returns per unit of risk. Tennant Company is currently generating about 0.28 per unit of volatility. If you would invest 8,152 in Tennant Company on October 26, 2024 and sell it today you would earn a total of 487.00 from holding Tennant Company or generate 5.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
ITT Inc vs. Tennant Company
Performance |
| Timeline |
| ITT Inc |
| Tennant Company |
ITT and Tennant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITT and Tennant
The main advantage of trading using opposite ITT and Tennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITT position performs unexpectedly, Tennant 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 Tennant will offset losses from the drop in Tennant's long position.The idea behind ITT Inc and Tennant Company 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.| Tennant vs. Franklin Electric Co | Tennant vs. Omega Flex | Tennant vs. Luxfer Holdings PLC | Tennant vs. Kadant Inc |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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