Correlation Between Titan Machinery and Zimmer Biomet

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

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

Diversification Opportunities for Titan Machinery and Zimmer Biomet

0.7

Correlation Coefficient

Titan Machinery  Zimmer Biomet

Poor diversification

The 3 months correlation between Titan and Zimmer is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Zimmer Biomet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimmer Biomet Holdings 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 Zimmer Biomet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimmer Biomet Holdings has no effect on the direction of Titan Machinery i.e., Titan Machinery and Zimmer Biomet go up and down completely randomly.

Pair Corralation between Titan Machinery and Zimmer Biomet

Assuming the 90 days horizon Titan Machinery is expected to under-perform the Zimmer Biomet. In addition to that, Titan Machinery is 2.45 times more volatile than Zimmer Biomet Holdings. It trades about -0.04 of its total potential returns per unit of risk. Zimmer Biomet Holdings is currently generating about -0.01 per unit of volatility. If you would invest  11,054  in Zimmer Biomet Holdings on October 11, 2024 and sell it today you would lose (1,142) from holding Zimmer Biomet Holdings or give up 10.33% of portfolio value over 90 days.

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

Titan Machinery  vs.  Zimmer Biomet Holdings

Titan Machinery

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 5 (%) 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.

Zimmer Biomet Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zimmer Biomet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Titan Machinery and Zimmer Biomet

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

The idea behind Titan Machinery and Zimmer Biomet Holdings 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.