Correlation Between GALP ENERGADR and Titan Machinery

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

By analyzing existing cross correlation between GALP ENERGADR 15 and Titan Machinery, you can compare the effects of market volatilities on GALP ENERGADR 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 GALP ENERGADR with a short position of Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of GALP ENERGADR and Titan Machinery.

Diversification Opportunities for GALP ENERGADR and Titan Machinery

-0.08

Correlation Coefficient

GALP ENERGADR  Titan Machinery

Good diversification

The 3 months correlation between GALP and Titan is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding GALP ENERGADR 15 and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and GALP ENERGADR 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 GALP ENERGADR 15 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 GALP ENERGADR i.e., GALP ENERGADR and Titan Machinery go up and down completely randomly.

Pair Corralation between GALP ENERGADR and Titan Machinery

Assuming the 90 days trading horizon GALP ENERGADR 15 is expected to under-perform the Titan Machinery. But the stock apears to be less risky and, when comparing its historical volatility, GALP ENERGADR 15 is 1.78 times less risky than Titan Machinery. The stock trades about -0.07 of its potential returns per unit of risk. The Titan Machinery is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,320  in Titan Machinery on December 19, 2024 and sell it today you would earn a total of  0.00  from holding Titan Machinery or generate 0.0% return on investment over 90 days.

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

GALP ENERGADR 15  vs.  Titan Machinery

GALP ENERGADR 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days GALP ENERGADR 15 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 GALP ENERGADR and Titan Machinery

The main advantage of trading using opposite GALP ENERGADR and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GALP ENERGADR 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 GALP ENERGADR 15 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.