Correlation Between ALEFARM BREWING and Titan Machinery

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

By analyzing existing cross correlation between ALEFARM BREWING DK 05 and Titan Machinery, you can compare the effects of market volatilities on ALEFARM BREWING 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 ALEFARM BREWING with a short position of Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALEFARM BREWING and Titan Machinery.

Diversification Opportunities for ALEFARM BREWING and Titan Machinery

-0.36

Correlation Coefficient

ALEFARM BREWING  Titan Machinery

Very good diversification

The 3 months correlation between ALEFARM and Titan is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ALEFARM BREWING DK 05 and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and ALEFARM BREWING 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 ALEFARM BREWING DK 05 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 ALEFARM BREWING i.e., ALEFARM BREWING and Titan Machinery go up and down completely randomly.

Pair Corralation between ALEFARM BREWING and Titan Machinery

Assuming the 90 days horizon ALEFARM BREWING DK 05 is expected to under-perform the Titan Machinery. In addition to that, ALEFARM BREWING is 1.69 times more volatile than Titan Machinery. It trades about -0.05 of its total potential returns per unit of risk. Titan Machinery is currently generating about 0.01 per unit of volatility. If you would invest  1,270  in Titan Machinery on September 28, 2024 and sell it today you would lose (10.00) from holding Titan Machinery or give up 0.79% of portfolio value over 90 days.

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

ALEFARM BREWING DK 05  vs.  Titan Machinery

ALEFARM BREWING DK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALEFARM BREWING DK 05 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with ALEFARM BREWING and Titan Machinery

The main advantage of trading using opposite ALEFARM BREWING and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALEFARM BREWING 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 ALEFARM BREWING DK 05 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.