Correlation Between Titan Machinery and ArcelorMittal

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

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

Diversification Opportunities for Titan Machinery and ArcelorMittal

0.24

Correlation Coefficient

Titan Machinery  ArcelorMittal

Modest diversification

The 3 months correlation between Titan and ArcelorMittal is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of Titan Machinery i.e., Titan Machinery and ArcelorMittal go up and down completely randomly.

Pair Corralation between Titan Machinery and ArcelorMittal

Given the investment horizon of 90 days Titan Machinery is expected to generate 1.21 times more return on investment than ArcelorMittal. However, Titan Machinery is 1.21 times more volatile than ArcelorMittal SA ADR. It trades about 0.11 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about 0.13 per unit of risk. If you would invest  1,382  in Titan Machinery on December 30, 2024 and sell it today you would earn a total of  345.00  from holding Titan Machinery or generate 24.96% return on investment over 90 days.

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

Titan Machinery  vs.  ArcelorMittal SA ADR

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.

ArcelorMittal SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal SA ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ArcelorMittal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Machinery and ArcelorMittal

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

The idea behind Titan Machinery and ArcelorMittal SA 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..