Correlation Between COMMERCIAL VEHICLE and Titan Machinery

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

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

Diversification Opportunities for COMMERCIAL VEHICLE and Titan Machinery

-0.66

Correlation Coefficient

COMMERCIAL VEHICLE  Titan Machinery

Excellent diversification

The 3 months correlation between COMMERCIAL and Titan is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and Titan Machinery go up and down completely randomly.

Pair Corralation between COMMERCIAL VEHICLE and Titan Machinery

Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to generate 2.26 times more return on investment than Titan Machinery. However, COMMERCIAL VEHICLE is 2.26 times more volatile than Titan Machinery. It trades about -0.05 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.44 per unit of risk. If you would invest  222.00  in COMMERCIAL VEHICLE on September 29, 2024 and sell it today you would lose (12.00) from holding COMMERCIAL VEHICLE or give up 5.41% of portfolio value over 90 days.

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

COMMERCIAL VEHICLE  vs.  Titan Machinery

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. Despite nearly stable basic indicators, Titan Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with COMMERCIAL VEHICLE and Titan Machinery

The main advantage of trading using opposite COMMERCIAL VEHICLE and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.