Correlation Between Now and Titan Machinery

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

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

Diversification Opportunities for Now and Titan Machinery

0.65

Correlation Coefficient

Now  Titan Machinery

Poor diversification

The 3 months correlation between Now and Titan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and Now 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 Now Inc 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 Now i.e., Now and Titan Machinery go up and down completely randomly.

Pair Corralation between Now and Titan Machinery

Given the investment horizon of 90 days Now Inc is expected to generate 0.94 times more return on investment than Titan Machinery. However, Now Inc is 1.06 times less risky than Titan Machinery. It trades about 0.14 of its potential returns per unit of risk. Titan Machinery is currently generating about 0.12 per unit of risk. If you would invest  1,313  in Now Inc on December 26, 2024 and sell it today you would earn a total of  383.00  from holding Now Inc or generate 29.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Now Inc  vs.  Titan Machinery

Now Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Now Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Now showed solid returns over the last few months and may actually be approaching a breakup point.

Titan Machinery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Titan Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Now and Titan Machinery

The main advantage of trading using opposite Now and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now 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 Now Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.