Correlation Between Titan Machinery and Software Acquisition

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

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

Diversification Opportunities for Titan Machinery and Software Acquisition

0.71

Correlation Coefficient

Titan Machinery  Software Acquisition

Poor diversification

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

Pair Corralation between Titan Machinery and Software Acquisition

Given the investment horizon of 90 days Titan Machinery is expected to generate 0.69 times more return on investment than Software Acquisition. However, Titan Machinery is 1.44 times less risky than Software Acquisition. It trades about 0.12 of its potential returns per unit of risk. Software Acquisition Group is currently generating about 0.06 per unit of risk. If you would invest  1,382  in Titan Machinery on December 29, 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	Significant
Accuracy	100.0%
Values	Daily Returns

Titan Machinery  vs.  Software Acquisition 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.

Software Acquisition

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Software Acquisition Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Software Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Machinery and Software Acquisition

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

The idea behind Titan Machinery and Software Acquisition 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.