Correlation Between Titan Machinery and United Homes

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

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

Diversification Opportunities for Titan Machinery and United Homes

0.13

Correlation Coefficient

Titan Machinery  United Homes

Average diversification

The 3 months correlation between Titan and United is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and United Homes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Homes Group 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 United Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Homes Group has no effect on the direction of Titan Machinery i.e., Titan Machinery and United Homes go up and down completely randomly.

Pair Corralation between Titan Machinery and United Homes

Given the investment horizon of 90 days Titan Machinery is expected to generate 0.66 times more return on investment than United Homes. However, Titan Machinery is 1.52 times less risky than United Homes. It trades about 0.02 of its potential returns per unit of risk. United Homes Group is currently generating about -0.09 per unit of risk. If you would invest  1,393  in Titan Machinery on September 29, 2024 and sell it today you would earn a total of  20.00  from holding Titan Machinery or generate 1.44% return on investment over 90 days.

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

Titan Machinery  vs.  United Homes Group

Titan Machinery

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Titan Machinery is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

United Homes Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Homes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical 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.

Pair Trading with Titan Machinery and United Homes

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

The idea behind Titan Machinery and United Homes Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..