Correlation Between Titan Machinery and Gladstone Investment

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

By analyzing existing cross correlation between Titan Machinery and Gladstone Investment, you can compare the effects of market volatilities on Titan Machinery and Gladstone Investment 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 Gladstone Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Machinery and Gladstone Investment.

Diversification Opportunities for Titan Machinery and Gladstone Investment

0.64

Correlation Coefficient

Titan Machinery  Gladstone Investment

Poor diversification

The 3 months correlation between Titan and Gladstone is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment 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 Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Titan Machinery i.e., Titan Machinery and Gladstone Investment go up and down completely randomly.

Pair Corralation between Titan Machinery and Gladstone Investment

Assuming the 90 days horizon Titan Machinery is expected to generate 1.15 times less return on investment than Gladstone Investment. In addition to that, Titan Machinery is 1.46 times more volatile than Gladstone Investment. It trades about 0.07 of its total potential returns per unit of risk. Gladstone Investment is currently generating about 0.12 per unit of volatility. If you would invest  1,085  in Gladstone Investment on August 31, 2024 and sell it today you would earn a total of  185.00  from holding Gladstone Investment or generate 17.05% 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.  Gladstone Investment

Titan Machinery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Titan Machinery reported solid returns over the last few months and may actually be approaching a breakup point.

Gladstone Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gladstone Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Machinery and Gladstone Investment

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

The idea behind Titan Machinery and Gladstone Investment 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.