Correlation Between Titan International and Maanshan Iron

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

By analyzing existing cross correlation between Titan International and Maanshan Iron Steel, you can compare the effects of market volatilities on Titan International and Maanshan Iron 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 International with a short position of Maanshan Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan International and Maanshan Iron.

Diversification Opportunities for Titan International and Maanshan Iron

0.73

Correlation Coefficient

Titan International  Maanshan Iron

Poor diversification

The 3 months correlation between Titan and Maanshan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Titan International and Maanshan Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maanshan Iron Steel and Titan International 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 International are associated (or correlated) with Maanshan Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maanshan Iron Steel has no effect on the direction of Titan International i.e., Titan International and Maanshan Iron go up and down completely randomly.

Pair Corralation between Titan International and Maanshan Iron

Considering the 90-day investment horizon Titan International is expected to generate 1.22 times more return on investment than Maanshan Iron. However, Titan International is 1.22 times more volatile than Maanshan Iron Steel. It trades about 0.16 of its potential returns per unit of risk. Maanshan Iron Steel is currently generating about 0.14 per unit of risk. If you would invest  669.00  in Titan International on December 29, 2024 and sell it today you would earn a total of  227.00  from holding Titan International or generate 33.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.44%
Values	Daily Returns

Titan International  vs.  Maanshan Iron Steel

Titan International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Titan International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Titan International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Maanshan Iron Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maanshan Iron Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Maanshan Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan International and Maanshan Iron

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

The idea behind Titan International and Maanshan Iron Steel 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.