Correlation Between Titan Machinery and Global Engine

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

By analyzing existing cross correlation between Titan Machinery and Global Engine Group, you can compare the effects of market volatilities on Titan Machinery and Global Engine 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 Global Engine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Machinery and Global Engine.

Diversification Opportunities for Titan Machinery and Global Engine

-0.52

Correlation Coefficient

Titan Machinery  Global Engine

Excellent diversification

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

Pair Corralation between Titan Machinery and Global Engine

Given the investment horizon of 90 days Titan Machinery is expected to generate 1.77 times less return on investment than Global Engine. But when comparing it to its historical volatility, Titan Machinery is 2.29 times less risky than Global Engine. It trades about 0.12 of its potential returns per unit of risk. Global Engine Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  150.00  in Global Engine Group on December 26, 2024 and sell it today you would earn a total of  47.00  from holding Global Engine Group or generate 31.33% return on investment over 90 days.

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

Titan Machinery  vs.  Global Engine Group

Titan Machinery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 9 (%) 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.

Global Engine Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Engine Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Global Engine exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Machinery and Global Engine

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

The idea behind Titan Machinery and Global Engine Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.