Correlation Between Tennant and Taylor Devices
Can any of the company-specific risk be diversified away by investing in both Tennant 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 Tennant and Taylor Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tennant Company and Taylor Devices, you can compare the effects of market volatilities on Tennant 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 Tennant with a short position of Taylor Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tennant and Taylor Devices.
Diversification Opportunities for Tennant and Taylor Devices
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tennant and Taylor is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Tennant Company and Taylor Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taylor Devices and Tennant 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 Tennant Company 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 Tennant i.e., Tennant and Taylor Devices go up and down completely randomly.
Pair Corralation between Tennant and Taylor Devices
Considering the 90-day investment horizon Tennant Company is expected to generate 0.32 times more return on investment than Taylor Devices. However, Tennant Company is 3.17 times less risky than Taylor Devices. It trades about 0.31 of its potential returns per unit of risk. Taylor Devices is currently generating about -0.27 per unit of risk. If you would invest 8,064 in Tennant Company on October 25, 2024 and sell it today you would earn a total of 548.00 from holding Tennant Company or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tennant Company vs. Taylor Devices
Performance |
| Timeline |
| Tennant Company |
| Taylor Devices |
Tennant and Taylor Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tennant and Taylor Devices
The main advantage of trading using opposite Tennant and Taylor Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tennant 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.| Tennant vs. Franklin Electric Co | Tennant vs. Omega Flex | Tennant vs. Luxfer Holdings PLC | Tennant vs. Kadant Inc |
| Taylor Devices vs. Tennant Company | Taylor Devices vs. Kadant Inc | Taylor Devices vs. Enpro Industries | Taylor Devices vs. Luxfer Holdings PLC |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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