Correlation Between Titan Machinery and SunLink Health

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

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

Diversification Opportunities for Titan Machinery and SunLink Health

0.06

Correlation Coefficient

Titan Machinery  SunLink Health

Significant diversification

The 3 months correlation between Titan and SunLink is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and SunLink Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunLink Health Systems 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 SunLink Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunLink Health Systems has no effect on the direction of Titan Machinery i.e., Titan Machinery and SunLink Health go up and down completely randomly.

Pair Corralation between Titan Machinery and SunLink Health

Given the investment horizon of 90 days Titan Machinery is expected to generate 0.76 times more return on investment than SunLink Health. However, Titan Machinery is 1.31 times less risky than SunLink Health. It trades about 0.08 of its potential returns per unit of risk. SunLink Health Systems is currently generating about -0.01 per unit of risk. If you would invest  1,391  in Titan Machinery on August 31, 2024 and sell it today you would earn a total of  178.00  from holding Titan Machinery or generate 12.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Titan Machinery  vs.  SunLink Health Systems

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.

SunLink Health Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SunLink Health Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SunLink Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Titan Machinery and SunLink Health

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

The idea behind Titan Machinery and SunLink Health Systems 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.