Correlation Between Tennant and CSW Industrials

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

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

Diversification Opportunities for Tennant and CSW Industrials

0.03

Correlation Coefficient

Tennant  CSW Industrials

Significant diversification

The 3 months correlation between Tennant and CSW is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Tennant Company and CSW Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSW Industrials 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 CSW Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSW Industrials has no effect on the direction of Tennant i.e., Tennant and CSW Industrials go up and down completely randomly.

Pair Corralation between Tennant and CSW Industrials

Considering the 90-day investment horizon Tennant Company is expected to under-perform the CSW Industrials. But the stock apears to be less risky and, when comparing its historical volatility, Tennant Company is 1.04 times less risky than CSW Industrials. The stock trades about -0.14 of its potential returns per unit of risk. The CSW Industrials is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  36,615  in CSW Industrials on September 28, 2024 and sell it today you would lose (1,218) from holding CSW Industrials or give up 3.33% of portfolio value over 90 days.

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

Tennant Company  vs.  CSW Industrials

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 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.

CSW Industrials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSW Industrials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CSW Industrials is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Tennant and CSW Industrials

The main advantage of trading using opposite Tennant and CSW Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tennant position performs unexpectedly, CSW Industrials 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 CSW Industrials will offset losses from the drop in CSW Industrials' long position.

The idea behind Tennant Company and CSW Industrials 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.