Correlation Between Volkswagen and Titan Machinery

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

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

Diversification Opportunities for Volkswagen and Titan Machinery

-0.72

Correlation Coefficient

Volkswagen  Titan Machinery

Pay attention - limited upside

The 3 months correlation between Volkswagen and Titan is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and Volkswagen 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 Volkswagen AG 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 Volkswagen i.e., Volkswagen and Titan Machinery go up and down completely randomly.

Pair Corralation between Volkswagen and Titan Machinery

Assuming the 90 days trading horizon Volkswagen AG is expected to generate 0.46 times more return on investment than Titan Machinery. However, Volkswagen AG is 2.15 times less risky than Titan Machinery. It trades about -0.05 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.05 per unit of risk. If you would invest  11,513  in Volkswagen AG on October 7, 2024 and sell it today you would lose (2,628) from holding Volkswagen AG or give up 22.83% of portfolio value over 90 days.

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

Volkswagen AG  vs.  Titan Machinery

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Titan Machinery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Titan Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Volkswagen and Titan Machinery

The main advantage of trading using opposite Volkswagen and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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 Volkswagen AG 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 CEOs Directory module to screen CEOs from public companies around the world.