Correlation Between Titan Company and TopBuild Corp

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

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

Diversification Opportunities for Titan Company and TopBuild Corp

-0.35

Correlation Coefficient

Titan Company  TopBuild Corp

Very good diversification

The 3 months correlation between Titan and TopBuild is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and TopBuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TopBuild Corp and Titan Company 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 Titan Company Limited are associated (or correlated) with TopBuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TopBuild Corp has no effect on the direction of Titan Company i.e., Titan Company and TopBuild Corp go up and down completely randomly.

Pair Corralation between Titan Company and TopBuild Corp

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the TopBuild Corp. In addition to that, Titan Company is 1.7 times more volatile than TopBuild Corp. It trades about -0.09 of its total potential returns per unit of risk. TopBuild Corp is currently generating about 0.22 per unit of volatility. If you would invest  732,500  in TopBuild Corp on September 12, 2024 and sell it today you would earn a total of  78,259  from holding TopBuild Corp or generate 10.68% return on investment over 90 days.

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

Titan Company Limited  vs.  TopBuild Corp

Titan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

TopBuild Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TopBuild Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, TopBuild Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Titan Company and TopBuild Corp

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

The idea behind Titan Company Limited and TopBuild Corp 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.