Correlation Between Titan Machinery and Weibo Corp

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

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

Diversification Opportunities for Titan Machinery and Weibo Corp

0.17

Correlation Coefficient

Titan Machinery  Weibo Corp

Average diversification

The 3 months correlation between Titan and Weibo is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Titan Machinery i.e., Titan Machinery and Weibo Corp go up and down completely randomly.

Pair Corralation between Titan Machinery and Weibo Corp

Given the investment horizon of 90 days Titan Machinery is expected to generate 5.58 times less return on investment than Weibo Corp. But when comparing it to its historical volatility, Titan Machinery is 1.33 times less risky than Weibo Corp. It trades about 0.08 of its potential returns per unit of risk. Weibo Corp is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  851.00  in Weibo Corp on September 19, 2024 and sell it today you would earn a total of  195.00  from holding Weibo Corp or generate 22.91% 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.  Weibo Corp

Titan Machinery

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 2 (%) 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.

Weibo Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Titan Machinery and Weibo Corp

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

The idea behind Titan Machinery and Weibo Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.