Correlation Between Titan Machinery and NAKED WINES

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

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

Diversification Opportunities for Titan Machinery and NAKED WINES

-0.28

Correlation Coefficient

Titan Machinery  NAKED WINES

Very good diversification

The 3 months correlation between Titan and NAKED is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and NAKED WINES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAKED WINES PLC 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 NAKED WINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAKED WINES PLC has no effect on the direction of Titan Machinery i.e., Titan Machinery and NAKED WINES go up and down completely randomly.

Pair Corralation between Titan Machinery and NAKED WINES

Assuming the 90 days horizon Titan Machinery is expected to generate 0.69 times more return on investment than NAKED WINES. However, Titan Machinery is 1.44 times less risky than NAKED WINES. It trades about 0.31 of its potential returns per unit of risk. NAKED WINES PLC is currently generating about -0.04 per unit of risk. If you would invest  1,260  in Titan Machinery on October 22, 2024 and sell it today you would earn a total of  180.00  from holding Titan Machinery or generate 14.29% return on investment over 90 days.

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

Titan Machinery  vs.  NAKED WINES PLC

Titan Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 4 (%) 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 February 2025.

NAKED WINES PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAKED WINES PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Titan Machinery and NAKED WINES

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

The idea behind Titan Machinery and NAKED WINES PLC 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.