Correlation Between Titan Machinery and Universal Insurance

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Can any of the company-specific risk be diversified away by investing in both Titan Machinery and Universal Insurance 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 Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Titan Machinery and Universal Insurance Holdings, you can compare the effects of market volatilities on Titan Machinery and Universal Insurance 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 Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Machinery and Universal Insurance.

Diversification Opportunities for Titan Machinery and Universal Insurance

0.52
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between Titan Machinery and Universal Insurance

Given the investment horizon of 90 days Titan Machinery is expected to generate 1.83 times more return on investment than Universal Insurance. However, Titan Machinery is 1.83 times more volatile than Universal Insurance Holdings. It trades about -0.05 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about -0.16 per unit of risk. If you would invest  1,483  in Titan Machinery on October 9, 2024 and sell it today you would lose (91.00) from holding Titan Machinery or give up 6.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Titan Machinery  vs.  Universal Insurance Holdings

 Performance 
       Timeline  
Titan Machinery 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Titan Machinery is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Universal Insurance 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Universal Insurance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Titan Machinery and Universal Insurance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Titan Machinery and Universal Insurance

The main advantage of trading using opposite Titan Machinery and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Machinery position performs unexpectedly, Universal Insurance 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 Universal Insurance will offset losses from the drop in Universal Insurance's long position.
The idea behind Titan Machinery and Universal Insurance Holdings 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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