Correlation Between SOUTHERN and Titan Machinery

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

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

Diversification Opportunities for SOUTHERN and Titan Machinery

-0.3

Correlation Coefficient

SOUTHERN  Titan Machinery

Very good diversification

The 3 months correlation between SOUTHERN and Titan is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHERN PER CORP and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and SOUTHERN 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 SOUTHERN PER CORP are associated (or correlated) with Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of SOUTHERN i.e., SOUTHERN and Titan Machinery go up and down completely randomly.

Pair Corralation between SOUTHERN and Titan Machinery

Assuming the 90 days trading horizon SOUTHERN PER CORP is expected to generate 15.66 times more return on investment than Titan Machinery. However, SOUTHERN is 15.66 times more volatile than Titan Machinery. It trades about 0.04 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.06 per unit of risk. If you would invest  11,401  in SOUTHERN PER CORP on October 4, 2024 and sell it today you would earn a total of  23.00  from holding SOUTHERN PER CORP or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.15%
Values	Daily Returns

SOUTHERN PER CORP  vs.  Titan Machinery

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Titan Machinery

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with SOUTHERN and Titan Machinery

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

The idea behind SOUTHERN PER CORP and Titan Machinery 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.