Correlation Between Titan Machinery and Wabash National

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

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

Diversification Opportunities for Titan Machinery and Wabash National

0.36

Correlation Coefficient

Titan Machinery  Wabash National

Weak diversification

The 3 months correlation between Titan and Wabash is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Titan Machinery i.e., Titan Machinery and Wabash National go up and down completely randomly.

Pair Corralation between Titan Machinery and Wabash National

Given the investment horizon of 90 days Titan Machinery is expected to under-perform the Wabash National. In addition to that, Titan Machinery is 1.24 times more volatile than Wabash National. It trades about -0.06 of its total potential returns per unit of risk. Wabash National is currently generating about -0.03 per unit of volatility. If you would invest  2,472  in Wabash National on September 6, 2024 and sell it today you would lose (461.00) from holding Wabash National or give up 18.65% of portfolio value over 90 days.

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

Titan Machinery  vs.  Wabash National

Titan Machinery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Machinery are ranked lower than 5 (%) 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.

Wabash National

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Wabash National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Titan Machinery and Wabash National

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

The idea behind Titan Machinery and Wabash National 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.