Correlation Between Titan Machinery and Benchmark Electronics

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

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

Diversification Opportunities for Titan Machinery and Benchmark Electronics

0.66

Correlation Coefficient

Titan Machinery  Benchmark Electronics

Poor diversification

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

Pair Corralation between Titan Machinery and Benchmark Electronics

Assuming the 90 days horizon Titan Machinery is expected to generate 1.36 times more return on investment than Benchmark Electronics. However, Titan Machinery is 1.36 times more volatile than Benchmark Electronics. It trades about 0.22 of its potential returns per unit of risk. Benchmark Electronics is currently generating about -0.01 per unit of risk. If you would invest  1,340  in Titan Machinery on October 26, 2024 and sell it today you would earn a total of  130.00  from holding Titan Machinery or generate 9.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Titan Machinery  vs.  Benchmark Electronics

Titan Machinery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 7 (%) 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.

Benchmark Electronics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Benchmark Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Machinery and Benchmark Electronics

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

The idea behind Titan Machinery and Benchmark Electronics 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.