Correlation Between Titan Machinery and Schibsted ASA

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

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

Diversification Opportunities for Titan Machinery and Schibsted ASA

0.71

Correlation Coefficient

Titan Machinery  Schibsted ASA

Poor diversification

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

Pair Corralation between Titan Machinery and Schibsted ASA

Assuming the 90 days horizon Titan Machinery is expected to under-perform the Schibsted ASA. But the stock apears to be less risky and, when comparing its historical volatility, Titan Machinery is 1.01 times less risky than Schibsted ASA. The stock trades about -0.03 of its potential returns per unit of risk. The Schibsted ASA A is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,768  in Schibsted ASA A on September 28, 2024 and sell it today you would earn a total of  1,176  from holding Schibsted ASA A or generate 66.52% return on investment over 90 days.

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

Titan Machinery  vs.  Schibsted ASA A

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. 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.

Schibsted ASA A

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schibsted ASA A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Schibsted ASA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Titan Machinery and Schibsted ASA

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

The idea behind Titan Machinery and Schibsted ASA A 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.