Correlation Between Penta Ocean and TITAN MACHINERY

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

By analyzing existing cross correlation between Penta Ocean Construction Co and TITAN MACHINERY, you can compare the effects of market volatilities on Penta Ocean 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 Penta Ocean with a short position of TITAN MACHINERY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and TITAN MACHINERY.

Diversification Opportunities for Penta Ocean and TITAN MACHINERY

0.07

Correlation Coefficient

Penta Ocean  TITAN MACHINERY

Significant diversification

The 3 months correlation between Penta and TITAN is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and TITAN MACHINERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TITAN MACHINERY and Penta Ocean 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 Penta Ocean Construction Co 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 Penta Ocean i.e., Penta Ocean and TITAN MACHINERY go up and down completely randomly.

Pair Corralation between Penta Ocean and TITAN MACHINERY

Assuming the 90 days horizon Penta Ocean is expected to generate 2.14 times less return on investment than TITAN MACHINERY. But when comparing it to its historical volatility, Penta Ocean Construction Co is 1.82 times less risky than TITAN MACHINERY. It trades about 0.1 of its potential returns per unit of risk. TITAN MACHINERY is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,310  in TITAN MACHINERY on December 28, 2024 and sell it today you would earn a total of  340.00  from holding TITAN MACHINERY or generate 25.95% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  TITAN MACHINERY

Penta Ocean Construc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penta Ocean reported 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 rather uncertain basic indicators, TITAN MACHINERY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penta Ocean and TITAN MACHINERY

The main advantage of trading using opposite Penta Ocean and TITAN MACHINERY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta Ocean 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 Penta Ocean Construction Co 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.