Correlation Between Timken and Marine Products

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

By analyzing existing cross correlation between Timken Company and Marine Products, you can compare the effects of market volatilities on Timken and Marine Products 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 Timken with a short position of Marine Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Marine Products.

Diversification Opportunities for Timken and Marine Products

-0.54

Correlation Coefficient

Timken  Marine Products

Excellent diversification

The 3 months correlation between Timken and Marine is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products and Timken 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 Timken Company are associated (or correlated) with Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Timken i.e., Timken and Marine Products go up and down completely randomly.

Pair Corralation between Timken and Marine Products

Considering the 90-day investment horizon Timken Company is expected to generate 0.75 times more return on investment than Marine Products. However, Timken Company is 1.33 times less risky than Marine Products. It trades about 0.01 of its potential returns per unit of risk. Marine Products is currently generating about 0.01 per unit of risk. If you would invest  6,834  in Timken Company on September 20, 2024 and sell it today you would earn a total of  307.00  from holding Timken Company or generate 4.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Timken Company  vs.  Marine Products

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Marine Products

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Timken and Marine Products

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

The idea behind Timken Company and Marine Products 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 CEOs Directory module to screen CEOs from public companies around the world.