Correlation Between Aluminumof China and Titan Machinery

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

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

Diversification Opportunities for Aluminumof China and Titan Machinery

0.29

Correlation Coefficient

Aluminumof China  Titan Machinery

Modest diversification

The 3 months correlation between Aluminumof and Titan is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and Aluminumof China 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 Aluminum of 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 Aluminumof China i.e., Aluminumof China and Titan Machinery go up and down completely randomly.

Pair Corralation between Aluminumof China and Titan Machinery

Assuming the 90 days horizon Aluminum of is expected to generate 1.46 times more return on investment than Titan Machinery. However, Aluminumof China is 1.46 times more volatile than Titan Machinery. It trades about 0.09 of its potential returns per unit of risk. Titan Machinery is currently generating about 0.11 per unit of risk. If you would invest  45.00  in Aluminum of on September 17, 2024 and sell it today you would earn a total of  10.00  from holding Aluminum of or generate 22.22% return on investment over 90 days.

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

Aluminum of  vs.  Titan Machinery

Aluminumof China

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aluminumof China reported solid returns over the last few months and may actually be approaching a breakup point.

Titan Machinery

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Titan Machinery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aluminumof China and Titan Machinery

The main advantage of trading using opposite Aluminumof China and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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 Aluminum of 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.