Correlation Between Titan Company and National Health

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

Diversification Opportunities for Titan Company and National Health

0.28

Correlation Coefficient

Titan Company  National Health

Modest diversification

The 3 months correlation between Titan and National is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and National Health Scan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Scan 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 National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Scan has no effect on the direction of Titan Company i.e., Titan Company and National Health go up and down completely randomly.

Pair Corralation between Titan Company and National Health

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the National Health. But the stock apears to be less risky and, when comparing its historical volatility, Titan Company Limited is 19.68 times less risky than National Health. The stock trades about -0.38 of its potential returns per unit of risk. The National Health Scan is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1.80  in National Health Scan on December 2, 2024 and sell it today you would lose (1.10) from holding National Health Scan or give up 61.11% of portfolio value over 90 days.

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

Titan Company Limited  vs.  National Health Scan

Titan Limited

Risk-Adjusted Performance

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.

National Health Scan

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Health Scan has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, National Health is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Titan Company and National Health

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

The idea behind Titan Company Limited and National Health Scan 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.