Correlation Between Titan Machinery and Westrock Coffee

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

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

Diversification Opportunities for Titan Machinery and Westrock Coffee

0.82

Correlation Coefficient

Titan Machinery  Westrock Coffee

Very poor diversification

The 3 months correlation between Titan and Westrock is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Titan Machinery i.e., Titan Machinery and Westrock Coffee go up and down completely randomly.

Pair Corralation between Titan Machinery and Westrock Coffee

Given the investment horizon of 90 days Titan Machinery is expected to under-perform the Westrock Coffee. In addition to that, Titan Machinery is 1.17 times more volatile than Westrock Coffee. It trades about -0.06 of its total potential returns per unit of risk. Westrock Coffee is currently generating about -0.05 per unit of volatility. If you would invest  1,297  in Westrock Coffee on October 11, 2024 and sell it today you would lose (671.00) from holding Westrock Coffee or give up 51.73% of portfolio value over 90 days.

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

Titan Machinery  vs.  Westrock Coffee

Titan Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Westrock Coffee

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westrock Coffee are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Westrock Coffee unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Machinery and Westrock Coffee

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

The idea behind Titan Machinery and Westrock Coffee 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.