Correlation Between Titan Company and Marubeni Corp

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

Diversification Opportunities for Titan Company and Marubeni Corp

0.58

Correlation Coefficient

Titan Company  Marubeni Corp

Very weak diversification

The 3 months correlation between Titan and Marubeni is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and Marubeni Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marubeni Corp ADR 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 Marubeni Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marubeni Corp ADR has no effect on the direction of Titan Company i.e., Titan Company and Marubeni Corp go up and down completely randomly.

Pair Corralation between Titan Company and Marubeni Corp

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the Marubeni Corp. But the stock apears to be less risky and, when comparing its historical volatility, Titan Company Limited is 1.27 times less risky than Marubeni Corp. The stock trades about -0.1 of its potential returns per unit of risk. The Marubeni Corp ADR is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  16,320  in Marubeni Corp ADR on September 4, 2024 and sell it today you would lose (1,300) from holding Marubeni Corp ADR or give up 7.97% of portfolio value over 90 days.

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

Titan Company Limited  vs.  Marubeni Corp ADR

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.

Marubeni Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marubeni Corp ADR 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Titan Company and Marubeni Corp

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

The idea behind Titan Company Limited and Marubeni Corp ADR 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.