Correlation Between Taylor Devices and Tennant

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

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

Diversification Opportunities for Taylor Devices and Tennant

0.54

Correlation Coefficient

Taylor Devices  Tennant

Very weak diversification

The 3 months correlation between Taylor and Tennant is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Taylor Devices and Tennant Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tennant Company 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 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 Taylor Devices i.e., Taylor Devices and Tennant go up and down completely randomly.

Pair Corralation between Taylor Devices and Tennant

Given the investment horizon of 90 days Taylor Devices is expected to generate 2.27 times more return on investment than Tennant. However, Taylor Devices is 2.27 times more volatile than Tennant Company. It trades about 0.09 of its potential returns per unit of risk. Tennant Company is currently generating about 0.05 per unit of risk. If you would invest  1,135  in Taylor Devices on September 4, 2024 and sell it today you would earn a total of  3,516  from holding Taylor Devices or generate 309.78% return on investment over 90 days.

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

Taylor Devices  vs.  Tennant Company

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 latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Tennant Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tennant Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Tennant is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Taylor Devices and Tennant

The main advantage of trading using opposite Taylor Devices and Tennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taylor Devices 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 Taylor Devices 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.