Correlation Between Titan Company and EGF Theramed

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

Diversification Opportunities for Titan Company and EGF Theramed

-0.32

Correlation Coefficient

Titan Company  EGF Theramed

Very good diversification

The 3 months correlation between Titan and EGF is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and EGF Theramed Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGF Theramed Health 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 EGF Theramed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGF Theramed Health has no effect on the direction of Titan Company i.e., Titan Company and EGF Theramed go up and down completely randomly.

Pair Corralation between Titan Company and EGF Theramed

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the EGF Theramed. But the stock apears to be less risky and, when comparing its historical volatility, Titan Company Limited is 60.24 times less risky than EGF Theramed. The stock trades about -0.1 of its potential returns per unit of risk. The EGF Theramed Health is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9.50  in EGF Theramed Health on September 4, 2024 and sell it today you would earn a total of  12.50  from holding EGF Theramed Health or generate 131.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Titan Company Limited  vs.  EGF Theramed Health

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.

EGF Theramed Health

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EGF Theramed Health are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, EGF Theramed reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Company and EGF Theramed

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

The idea behind Titan Company Limited and EGF Theramed Health 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.