Correlation Between Titan Machinery and STEEL DYNAMICS

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

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

Diversification Opportunities for Titan Machinery and STEEL DYNAMICS

0.26

Correlation Coefficient

Titan Machinery  STEEL DYNAMICS

Modest diversification

The 3 months correlation between Titan and STEEL is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and STEEL DYNAMICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEEL DYNAMICS 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 STEEL DYNAMICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEEL DYNAMICS has no effect on the direction of Titan Machinery i.e., Titan Machinery and STEEL DYNAMICS go up and down completely randomly.

Pair Corralation between Titan Machinery and STEEL DYNAMICS

Assuming the 90 days horizon Titan Machinery is expected to under-perform the STEEL DYNAMICS. In addition to that, Titan Machinery is 1.6 times more volatile than STEEL DYNAMICS. It trades about -0.04 of its total potential returns per unit of risk. STEEL DYNAMICS is currently generating about 0.01 per unit of volatility. If you would invest  11,379  in STEEL DYNAMICS on October 26, 2024 and sell it today you would earn a total of  423.00  from holding STEEL DYNAMICS or generate 3.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Titan Machinery  vs.  STEEL DYNAMICS

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.

STEEL DYNAMICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL DYNAMICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, STEEL DYNAMICS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Titan Machinery and STEEL DYNAMICS

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

The idea behind Titan Machinery and STEEL DYNAMICS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.