Correlation Between TITAN MACHINERY and Kubota

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

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

Diversification Opportunities for TITAN MACHINERY and Kubota

-0.64

Correlation Coefficient

TITAN MACHINERY  Kubota

Excellent diversification

The 3 months correlation between TITAN and Kubota is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding TITAN MACHINERY and Kubota in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kubota and TITAN MACHINERY 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 MACHINERY are associated (or correlated) with Kubota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kubota has no effect on the direction of TITAN MACHINERY i.e., TITAN MACHINERY and Kubota go up and down completely randomly.

Pair Corralation between TITAN MACHINERY and Kubota

Assuming the 90 days trading horizon TITAN MACHINERY is expected to generate 1.91 times more return on investment than Kubota. However, TITAN MACHINERY is 1.91 times more volatile than Kubota. It trades about 0.1 of its potential returns per unit of risk. Kubota is currently generating about -0.08 per unit of risk. If you would invest  1,240  in TITAN MACHINERY on September 4, 2024 and sell it today you would earn a total of  220.00  from holding TITAN MACHINERY or generate 17.74% return on investment over 90 days.

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

TITAN MACHINERY  vs.  Kubota

TITAN MACHINERY

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TITAN MACHINERY are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TITAN MACHINERY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kubota

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kubota has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with TITAN MACHINERY and Kubota

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

The idea behind TITAN MACHINERY and Kubota 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.