Correlation Between Titan Machinery and AVITA Medical

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

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

Diversification Opportunities for Titan Machinery and AVITA Medical

0.78

Correlation Coefficient

Titan Machinery  AVITA Medical

Poor diversification

The 3 months correlation between Titan and AVITA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and AVITA Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVITA Medical 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 AVITA Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVITA Medical has no effect on the direction of Titan Machinery i.e., Titan Machinery and AVITA Medical go up and down completely randomly.

Pair Corralation between Titan Machinery and AVITA Medical

Assuming the 90 days horizon Titan Machinery is expected to under-perform the AVITA Medical. But the stock apears to be less risky and, when comparing its historical volatility, Titan Machinery is 1.33 times less risky than AVITA Medical. The stock trades about -0.05 of its potential returns per unit of risk. The AVITA Medical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  125.00  in AVITA Medical on September 26, 2024 and sell it today you would earn a total of  101.00  from holding AVITA Medical or generate 80.8% 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.  AVITA Medical

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. Despite nearly fragile basic indicators, Titan Machinery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AVITA Medical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AVITA Medical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, AVITA Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Machinery and AVITA Medical

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

The idea behind Titan Machinery and AVITA Medical 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.