Correlation Between Marine Products and Timken

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

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

Diversification Opportunities for Marine Products and Timken

-0.34

Correlation Coefficient

Marine Products  Timken

Very good diversification

The 3 months correlation between Marine and Timken is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Marine Products and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company and Marine Products 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 Marine Products are associated (or correlated) with Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Marine Products i.e., Marine Products and Timken go up and down completely randomly.

Pair Corralation between Marine Products and Timken

Considering the 90-day investment horizon Marine Products is expected to generate 0.67 times more return on investment than Timken. However, Marine Products is 1.5 times less risky than Timken. It trades about -0.02 of its potential returns per unit of risk. Timken Company is currently generating about -0.09 per unit of risk. If you would invest  957.00  in Marine Products on September 24, 2024 and sell it today you would lose (23.00) from holding Marine Products or give up 2.4% of portfolio value over 90 days.

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

Marine Products  vs.  Timken Company

Marine Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company 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 forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Marine Products and Timken

The main advantage of trading using opposite Marine Products and Timken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marine Products position performs unexpectedly, Timken 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 Timken will offset losses from the drop in Timken's long position.

The idea behind Marine Products and Timken Company 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.