Correlation Between TITAN MACHINERY and SAN MIGUEL

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

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

Diversification Opportunities for TITAN MACHINERY and SAN MIGUEL

0.12

Correlation Coefficient

TITAN MACHINERY  SAN MIGUEL

Average diversification

The 3 months correlation between TITAN and SAN is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding TITAN MACHINERY and SAN MIGUEL BREWERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAN MIGUEL BREWERY 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 SAN MIGUEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAN MIGUEL BREWERY has no effect on the direction of TITAN MACHINERY i.e., TITAN MACHINERY and SAN MIGUEL go up and down completely randomly.

Pair Corralation between TITAN MACHINERY and SAN MIGUEL

Assuming the 90 days trading horizon TITAN MACHINERY is expected to under-perform the SAN MIGUEL. But the stock apears to be less risky and, when comparing its historical volatility, TITAN MACHINERY is 1.18 times less risky than SAN MIGUEL. The stock trades about -0.01 of its potential returns per unit of risk. The SAN MIGUEL BREWERY is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10.00  in SAN MIGUEL BREWERY on December 19, 2024 and sell it today you would lose (0.50) from holding SAN MIGUEL BREWERY or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

TITAN MACHINERY  vs.  SAN MIGUEL BREWERY

TITAN MACHINERY

Risk-Adjusted Performance

Very Weak

Over the last 90 days TITAN MACHINERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TITAN MACHINERY is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SAN MIGUEL BREWERY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SAN MIGUEL is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with TITAN MACHINERY and SAN MIGUEL

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

The idea behind TITAN MACHINERY and SAN MIGUEL BREWERY 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.