Correlation Between TITAN MACHINERY and S A P

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

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

Diversification Opportunities for TITAN MACHINERY and S A P

0.66

Correlation Coefficient

TITAN MACHINERY  S A P

Poor diversification

The 3 months correlation between TITAN and SAP is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding TITAN MACHINERY and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of TITAN MACHINERY i.e., TITAN MACHINERY and S A P go up and down completely randomly.

Pair Corralation between TITAN MACHINERY and S A P

Assuming the 90 days trading horizon TITAN MACHINERY is expected to under-perform the S A P. In addition to that, TITAN MACHINERY is 2.4 times more volatile than SAP SE. It trades about -0.05 of its total potential returns per unit of risk. SAP SE is currently generating about 0.13 per unit of volatility. If you would invest  10,451  in SAP SE on October 4, 2024 and sell it today you would earn a total of  13,179  from holding SAP SE or generate 126.1% return on investment over 90 days.

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

TITAN MACHINERY  vs.  SAP SE

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

SAP SE

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, S A P unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TITAN MACHINERY and S A P

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

The idea behind TITAN MACHINERY and SAP SE 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 Global Correlations module to find global opportunities by holding instruments from different markets.