Correlation Between Barings BDC and Titan Machinery

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

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

Diversification Opportunities for Barings BDC and Titan Machinery

0.68

Correlation Coefficient

Barings BDC  Titan Machinery

Poor diversification

The 3 months correlation between Barings and Titan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and Barings BDC 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 Barings BDC 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 Barings BDC i.e., Barings BDC and Titan Machinery go up and down completely randomly.

Pair Corralation between Barings BDC and Titan Machinery

Given the investment horizon of 90 days Barings BDC is expected to generate 0.38 times more return on investment than Titan Machinery. However, Barings BDC is 2.64 times less risky than Titan Machinery. It trades about -0.32 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.23 per unit of risk. If you would invest  994.00  in Barings BDC on September 24, 2024 and sell it today you would lose (62.00) from holding Barings BDC or give up 6.24% of portfolio value over 90 days.

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

Barings BDC  vs.  Titan Machinery

Barings BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Titan Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Titan Machinery is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Barings BDC and Titan Machinery

The main advantage of trading using opposite Barings BDC and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings BDC 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 Barings BDC 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 Transaction History module to view history of all your transactions and understand their impact on performance.