Correlation Between Titan Machinery and Nufarm

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

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

Diversification Opportunities for Titan Machinery and Nufarm

0.6

Correlation Coefficient

Titan Machinery  Nufarm

Poor diversification

The 3 months correlation between Titan and Nufarm is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of Titan Machinery i.e., Titan Machinery and Nufarm go up and down completely randomly.

Pair Corralation between Titan Machinery and Nufarm

Assuming the 90 days horizon Titan Machinery is expected to generate 1.97 times more return on investment than Nufarm. However, Titan Machinery is 1.97 times more volatile than Nufarm Limited. It trades about 0.04 of its potential returns per unit of risk. Nufarm Limited is currently generating about 0.04 per unit of risk. If you would invest  1,270  in Titan Machinery on December 20, 2024 and sell it today you would earn a total of  50.00  from holding Titan Machinery or generate 3.94% 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.  Nufarm Limited

Titan Machinery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 2 (%) 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 April 2025.

Nufarm Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nufarm Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nufarm is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Titan Machinery and Nufarm

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

The idea behind Titan Machinery and Nufarm Limited 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.