Correlation Between Titan International and PACCAR

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

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

Diversification Opportunities for Titan International and PACCAR

-0.1

Correlation Coefficient

Titan International  PACCAR

Good diversification

The 3 months correlation between Titan and PACCAR is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Titan International and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Titan International i.e., Titan International and PACCAR go up and down completely randomly.

Pair Corralation between Titan International and PACCAR

Considering the 90-day investment horizon Titan International is expected to generate 2.0 times more return on investment than PACCAR. However, Titan International is 2.0 times more volatile than PACCAR Inc. It trades about 0.16 of its potential returns per unit of risk. PACCAR Inc is currently generating about -0.04 per unit of risk. If you would invest  669.00  in Titan International on December 28, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Titan International  vs.  PACCAR Inc

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.

PACCAR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACCAR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PACCAR is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Titan International and PACCAR

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

The idea behind Titan International and PACCAR Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.