Correlation Between Titan Machinery and Adient PLC

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

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

Diversification Opportunities for Titan Machinery and Adient PLC

-0.33

Correlation Coefficient

Titan Machinery  Adient PLC

Very good diversification

The 3 months correlation between Titan and Adient is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Adient PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adient PLC 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 Adient PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adient PLC has no effect on the direction of Titan Machinery i.e., Titan Machinery and Adient PLC go up and down completely randomly.

Pair Corralation between Titan Machinery and Adient PLC

Given the investment horizon of 90 days Titan Machinery is expected to generate 1.12 times more return on investment than Adient PLC. However, Titan Machinery is 1.12 times more volatile than Adient PLC. It trades about 0.09 of its potential returns per unit of risk. Adient PLC is currently generating about -0.04 per unit of risk. If you would invest  1,300  in Titan Machinery on September 10, 2024 and sell it today you would earn a total of  198.00  from holding Titan Machinery or generate 15.23% return on investment over 90 days.

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

Titan Machinery  vs.  Adient PLC

Titan Machinery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Titan Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adient PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Titan Machinery and Adient PLC

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

The idea behind Titan Machinery and Adient PLC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.