Correlation Between Titan Machinery and Stepan

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

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

Diversification Opportunities for Titan Machinery and Stepan

0.53

Correlation Coefficient

Titan Machinery  Stepan

Very weak diversification

The 3 months correlation between Titan and Stepan is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Titan Machinery i.e., Titan Machinery and Stepan go up and down completely randomly.

Pair Corralation between Titan Machinery and Stepan

Given the investment horizon of 90 days Titan Machinery is expected to under-perform the Stepan. In addition to that, Titan Machinery is 1.64 times more volatile than Stepan Company. It trades about -0.05 of its total potential returns per unit of risk. Stepan Company is currently generating about -0.03 per unit of volatility. If you would invest  10,793  in Stepan Company on September 2, 2024 and sell it today you would lose (3,103) from holding Stepan Company or give up 28.75% of portfolio value over 90 days.

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

Titan Machinery  vs.  Stepan Company

Titan Machinery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Titan Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

Stepan Company

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stepan Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Stepan is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Titan Machinery and Stepan

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

The idea behind Titan Machinery and Stepan Company 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.