Correlation Between Titan Company and SIR Royalty

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

Diversification Opportunities for Titan Company and SIR Royalty

-0.52

Correlation Coefficient

Titan Company  SIR Royalty

Excellent diversification

The 3 months correlation between Titan and SIR is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and SIR Royalty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIR Royalty Income 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 SIR Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIR Royalty Income has no effect on the direction of Titan Company i.e., Titan Company and SIR Royalty go up and down completely randomly.

Pair Corralation between Titan Company and SIR Royalty

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the SIR Royalty. But the stock apears to be less risky and, when comparing its historical volatility, Titan Company Limited is 1.11 times less risky than SIR Royalty. The stock trades about -0.12 of its potential returns per unit of risk. The SIR Royalty Income is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,250  in SIR Royalty Income on September 3, 2024 and sell it today you would earn a total of  4.00  from holding SIR Royalty Income or generate 0.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Titan Company Limited  vs.  SIR Royalty Income

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.

SIR Royalty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIR Royalty Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SIR Royalty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Titan Company and SIR Royalty

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

The idea behind Titan Company Limited and SIR Royalty Income 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.