Correlation Between Timken and MASSMU

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

By analyzing existing cross correlation between Timken Company and MASSMU 5672 01 DEC 52, you can compare the effects of market volatilities on Timken and MASSMU 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 Timken with a short position of MASSMU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and MASSMU.

Diversification Opportunities for Timken and MASSMU

-0.24

Correlation Coefficient

Timken  MASSMU

Very good diversification

The 3 months correlation between Timken and MASSMU is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and MASSMU 5672 01 DEC 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MASSMU 5672 01 and Timken 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 Timken Company are associated (or correlated) with MASSMU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MASSMU 5672 01 has no effect on the direction of Timken i.e., Timken and MASSMU go up and down completely randomly.

Pair Corralation between Timken and MASSMU

Considering the 90-day investment horizon Timken Company is expected to generate 0.74 times more return on investment than MASSMU. However, Timken Company is 1.35 times less risky than MASSMU. It trades about -0.09 of its potential returns per unit of risk. MASSMU 5672 01 DEC 52 is currently generating about -0.11 per unit of risk. If you would invest  8,391  in Timken Company on September 29, 2024 and sell it today you would lose (1,243) from holding Timken Company or give up 14.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	47.62%
Values	Daily Returns

Timken Company  vs.  MASSMU 5672 01 DEC 52

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

MASSMU 5672 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MASSMU 5672 01 DEC 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for MASSMU 5672 01 DEC 52 investors.

Pair Trading with Timken and MASSMU

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

The idea behind Timken Company and MASSMU 5672 01 DEC 52 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 Global Correlations module to find global opportunities by holding instruments from different markets.