Correlation Between Titan Machinery and National Beverage

Can any of the company-specific risk be diversified away by investing in both Titan Machinery and National Beverage 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 Machinery and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Titan Machinery and National Beverage Corp, you can compare the effects of market volatilities on Titan Machinery and National Beverage 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 Machinery with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Machinery and National Beverage.

Diversification Opportunities for Titan Machinery and National Beverage

0.71

Correlation Coefficient

Titan Machinery  National Beverage

Poor diversification

The 3 months correlation between Titan and National is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and Titan Machinery 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 Machinery are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Titan Machinery i.e., Titan Machinery and National Beverage go up and down completely randomly.

Pair Corralation between Titan Machinery and National Beverage

Given the investment horizon of 90 days Titan Machinery is expected to generate 1.85 times more return on investment than National Beverage. However, Titan Machinery is 1.85 times more volatile than National Beverage Corp. It trades about 0.08 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.06 per unit of risk. If you would invest  1,339  in Titan Machinery on September 14, 2024 and sell it today you would earn a total of  168.00  from holding Titan Machinery or generate 12.55% return on investment over 90 days.

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

Titan Machinery  vs.  National Beverage Corp

Titan Machinery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Titan Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

National Beverage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, National Beverage 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 Machinery and National Beverage

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

The idea behind Titan Machinery and National Beverage 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.