Correlation Between TITAN MACHINERY and General Electric

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

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

Diversification Opportunities for TITAN MACHINERY and General Electric

0.84

Correlation Coefficient

TITAN MACHINERY  General Electric

Very poor diversification

The 3 months correlation between TITAN and General is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding TITAN MACHINERY and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric and TITAN MACHINERY 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 TITAN MACHINERY are associated (or correlated) with General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of TITAN MACHINERY i.e., TITAN MACHINERY and General Electric go up and down completely randomly.

Pair Corralation between TITAN MACHINERY and General Electric

Assuming the 90 days trading horizon TITAN MACHINERY is expected to generate 1.66 times less return on investment than General Electric. In addition to that, TITAN MACHINERY is 1.72 times more volatile than General Electric. It trades about 0.05 of its total potential returns per unit of risk. General Electric is currently generating about 0.14 per unit of volatility. If you would invest  16,044  in General Electric on December 21, 2024 and sell it today you would earn a total of  2,856  from holding General Electric or generate 17.8% return on investment over 90 days.

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

TITAN MACHINERY  vs.  General Electric

TITAN MACHINERY

Risk-Adjusted Performance

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. In spite of rather weak basic indicators, TITAN MACHINERY may actually be approaching a critical reversion point that can send shares even higher in April 2025.

General Electric

Risk-Adjusted Performance

Good

Over the last 90 days General Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, General Electric displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TITAN MACHINERY and General Electric

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

The idea behind TITAN MACHINERY and General Electric 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..