Correlation Between Titan Company and DLH Holdings

Can any of the company-specific risk be diversified away by investing in both Titan Company and DLH Holdings 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 DLH Holdings 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 DLH Holdings Corp, you can compare the effects of market volatilities on Titan Company and DLH Holdings 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 DLH Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Company and DLH Holdings.

Diversification Opportunities for Titan Company and DLH Holdings

0.65

Correlation Coefficient

Titan Company  DLH Holdings

Poor diversification

The 3 months correlation between Titan and DLH is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and DLH Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DLH Holdings 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 DLH Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DLH Holdings Corp has no effect on the direction of Titan Company i.e., Titan Company and DLH Holdings go up and down completely randomly.

Pair Corralation between Titan Company and DLH Holdings

Assuming the 90 days trading horizon Titan Company is expected to generate 3.4 times less return on investment than DLH Holdings. But when comparing it to its historical volatility, Titan Company Limited is 2.28 times less risky than DLH Holdings. It trades about 0.09 of its potential returns per unit of risk. DLH Holdings Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  797.00  in DLH Holdings Corp on September 4, 2024 and sell it today you would earn a total of  74.00  from holding DLH Holdings Corp or generate 9.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Titan Company Limited  vs.  DLH Holdings 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 uncertain 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.

DLH Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DLH Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Titan Company and DLH Holdings

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

The idea behind Titan Company Limited and DLH Holdings 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.