Correlation Between CN MODERN and Titan Machinery

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

By analyzing existing cross correlation between CN MODERN DAIRY and Titan Machinery, you can compare the effects of market volatilities on CN MODERN and Titan Machinery 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 CN MODERN with a short position of Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and Titan Machinery.

Diversification Opportunities for CN MODERN and Titan Machinery

0.02

Correlation Coefficient

CN MODERN  Titan Machinery

Significant diversification

The 3 months correlation between 07M and Titan is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of CN MODERN i.e., CN MODERN and Titan Machinery go up and down completely randomly.

Pair Corralation between CN MODERN and Titan Machinery

Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 0.82 times more return on investment than Titan Machinery. However, CN MODERN DAIRY is 1.22 times less risky than Titan Machinery. It trades about 0.03 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.05 per unit of risk. If you would invest  9.03  in CN MODERN DAIRY on October 4, 2024 and sell it today you would earn a total of  1.97  from holding CN MODERN DAIRY or generate 21.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

CN MODERN DAIRY  vs.  Titan Machinery

CN MODERN DAIRY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, CN MODERN is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Titan Machinery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Titan Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CN MODERN and Titan Machinery

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

The idea behind CN MODERN DAIRY and Titan Machinery 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.