Correlation Between CTP NV and TITAN MACHINERY

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

By analyzing existing cross correlation between CTP NV EO and TITAN MACHINERY, you can compare the effects of market volatilities on CTP NV and TITAN MACHINERY 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 CTP NV with a short position of TITAN MACHINERY. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTP NV and TITAN MACHINERY.

Diversification Opportunities for CTP NV and TITAN MACHINERY

-0.16

Correlation Coefficient

CTP NV  TITAN MACHINERY

Good diversification

The 3 months correlation between CTP and TITAN is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding CTP NV EO and TITAN MACHINERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TITAN MACHINERY and CTP NV 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 CTP NV EO are associated (or correlated) with TITAN MACHINERY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TITAN MACHINERY has no effect on the direction of CTP NV i.e., CTP NV and TITAN MACHINERY go up and down completely randomly.

Pair Corralation between CTP NV and TITAN MACHINERY

Assuming the 90 days horizon CTP NV EO is expected to generate 0.31 times more return on investment than TITAN MACHINERY. However, CTP NV EO is 3.21 times less risky than TITAN MACHINERY. It trades about -0.06 of its potential returns per unit of risk. TITAN MACHINERY is currently generating about -0.11 per unit of risk. If you would invest  1,510  in CTP NV EO on October 11, 2024 and sell it today you would lose (14.00) from holding CTP NV EO or give up 0.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

CTP NV EO  vs.  TITAN MACHINERY

CTP NV EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTP NV EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

TITAN MACHINERY

Risk-Adjusted Performance

5 of 100

Modest

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. In spite of rather fragile basic indicators, TITAN MACHINERY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTP NV and TITAN MACHINERY

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

The idea behind CTP NV EO and TITAN MACHINERY 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.