Correlation Between Titan Machinery and CarsalesCom

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

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

Diversification Opportunities for Titan Machinery and CarsalesCom

0.71

Correlation Coefficient

Titan Machinery  CarsalesCom

Poor diversification

The 3 months correlation between Titan and CarsalesCom is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Titan Machinery i.e., Titan Machinery and CarsalesCom go up and down completely randomly.

Pair Corralation between Titan Machinery and CarsalesCom

Assuming the 90 days horizon Titan Machinery is expected to under-perform the CarsalesCom. In addition to that, Titan Machinery is 1.66 times more volatile than CarsalesCom. It trades about -0.48 of its total potential returns per unit of risk. CarsalesCom is currently generating about -0.62 per unit of volatility. If you would invest  2,560  in CarsalesCom on September 28, 2024 and sell it today you would lose (340.00) from holding CarsalesCom or give up 13.28% of portfolio value over 90 days.

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

Titan Machinery  vs.  CarsalesCom

Titan Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Titan Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CarsalesCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CarsalesCom is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Titan Machinery and CarsalesCom

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

The idea behind Titan Machinery and CarsalesCom 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.