Correlation Between Distribution Solutions and Titan Machinery

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

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

Diversification Opportunities for Distribution Solutions and Titan Machinery

-0.44

Correlation Coefficient

Distribution Solutions  Titan Machinery

Very good diversification

The 3 months correlation between Distribution and Titan is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Distribution Solutions Group and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and Distribution Solutions 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 Distribution Solutions Group 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 Distribution Solutions i.e., Distribution Solutions and Titan Machinery go up and down completely randomly.

Pair Corralation between Distribution Solutions and Titan Machinery

Given the investment horizon of 90 days Distribution Solutions Group is expected to under-perform the Titan Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Distribution Solutions Group is 1.58 times less risky than Titan Machinery. The stock trades about -0.13 of its potential returns per unit of risk. The Titan Machinery is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,382  in Titan Machinery on December 30, 2024 and sell it today you would earn a total of  345.00  from holding Titan Machinery or generate 24.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Distribution Solutions Group  vs.  Titan Machinery

Distribution Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Distribution Solutions Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 Distribution Solutions and Titan Machinery

The main advantage of trading using opposite Distribution Solutions and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Distribution Solutions 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 Distribution Solutions Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.