Correlation Between TITAN MACHINERY and Industrial

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

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

Diversification Opportunities for TITAN MACHINERY and Industrial

0.56

Correlation Coefficient

TITAN MACHINERY  Industrial

Very weak diversification

The 3 months correlation between TITAN and Industrial is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding TITAN MACHINERY and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of TITAN MACHINERY i.e., TITAN MACHINERY and Industrial go up and down completely randomly.

Pair Corralation between TITAN MACHINERY and Industrial

Assuming the 90 days trading horizon TITAN MACHINERY is expected to generate 1.43 times less return on investment than Industrial. But when comparing it to its historical volatility, TITAN MACHINERY is 1.15 times less risky than Industrial. It trades about 0.12 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Industrial and Commercial on December 28, 2024 and sell it today you would earn a total of  19.00  from holding Industrial and Commercial or generate 40.43% return on investment over 90 days.

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

TITAN MACHINERY  vs.  Industrial and Commercial

TITAN MACHINERY

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TITAN MACHINERY are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TITAN MACHINERY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Industrial and Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TITAN MACHINERY and Industrial

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

The idea behind TITAN MACHINERY and Industrial and Commercial 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.