Correlation Between Tennant and Ingersoll Rand

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

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

Diversification Opportunities for Tennant and Ingersoll Rand

0.17

Correlation Coefficient

Tennant  Ingersoll Rand

Average diversification

The 3 months correlation between Tennant and Ingersoll is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Tennant Company and Ingersoll Rand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingersoll Rand 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 Ingersoll Rand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingersoll Rand has no effect on the direction of Tennant i.e., Tennant and Ingersoll Rand go up and down completely randomly.

Pair Corralation between Tennant and Ingersoll Rand

Considering the 90-day investment horizon Tennant Company is expected to generate 1.02 times more return on investment than Ingersoll Rand. However, Tennant is 1.02 times more volatile than Ingersoll Rand. It trades about -0.44 of its potential returns per unit of risk. Ingersoll Rand is currently generating about -0.49 per unit of risk. If you would invest  9,090  in Tennant Company on September 25, 2024 and sell it today you would lose (1,026) from holding Tennant Company or give up 11.29% 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.  Ingersoll Rand

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.

Ingersoll Rand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ingersoll Rand has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Ingersoll Rand is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Tennant and Ingersoll Rand

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

The idea behind Tennant Company and Ingersoll Rand 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.