Correlation Between Titan Company and US Treasury

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

By analyzing existing cross correlation between Titan Company Limited and US Treasury 5, you can compare the effects of market volatilities on Titan Company and US Treasury 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 Company with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Company and US Treasury.

Diversification Opportunities for Titan Company and US Treasury

0.95

Correlation Coefficient

Titan Company  US Treasury

Almost no diversification

The 3 months correlation between Titan and UFIV is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited and US Treasury 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 5 and Titan Company 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 Company Limited are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 5 has no effect on the direction of Titan Company i.e., Titan Company and US Treasury go up and down completely randomly.

Pair Corralation between Titan Company and US Treasury

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the US Treasury. In addition to that, Titan Company is 5.72 times more volatile than US Treasury 5. It trades about -0.09 of its total potential returns per unit of risk. US Treasury 5 is currently generating about -0.13 per unit of volatility. If you would invest  4,941  in US Treasury 5 on September 12, 2024 and sell it today you would lose (96.00) from holding US Treasury 5 or give up 1.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.83%
Values	Daily Returns

Titan Company Limited  vs.  US Treasury 5

Titan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

US Treasury 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Treasury 5 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, US Treasury is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Titan Company and US Treasury

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

The idea behind Titan Company Limited and US Treasury 5 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.