Correlation Between SCOTT TECHNOLOGY and Titan Machinery

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

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

Diversification Opportunities for SCOTT TECHNOLOGY and Titan Machinery

0.48

Correlation Coefficient

SCOTT TECHNOLOGY  Titan Machinery

Very weak diversification

The 3 months correlation between SCOTT and Titan is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and Titan Machinery go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and Titan Machinery

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to generate 0.92 times more return on investment than Titan Machinery. However, SCOTT TECHNOLOGY is 1.09 times less risky than Titan Machinery. It trades about 0.01 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.05 per unit of risk. If you would invest  133.00  in SCOTT TECHNOLOGY on October 5, 2024 and sell it today you would lose (12.00) from holding SCOTT TECHNOLOGY or give up 9.02% of portfolio value over 90 days.

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

SCOTT TECHNOLOGY  vs.  Titan Machinery

SCOTT TECHNOLOGY

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days SCOTT TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain technical indicators, SCOTT TECHNOLOGY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Titan Machinery

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Titan Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SCOTT TECHNOLOGY and Titan Machinery

The main advantage of trading using opposite SCOTT TECHNOLOGY and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.