Correlation Between Applied Industrial and Titan Machinery
Can any of the company-specific risk be diversified away by investing in both Applied Industrial and Titan Machinery 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 Applied Industrial and Titan Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Industrial Technologies and Titan Machinery, you can compare the effects of market volatilities on Applied Industrial and Titan Machinery 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 Applied Industrial with a short position of Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Industrial and Titan Machinery.
Diversification Opportunities for Applied Industrial and Titan Machinery
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and Titan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Applied Industrial Technologie and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and Applied Industrial 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 Applied Industrial Technologies are associated (or correlated) with Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of Applied Industrial i.e., Applied Industrial and Titan Machinery go up and down completely randomly.
Pair Corralation between Applied Industrial and Titan Machinery
Considering the 90-day investment horizon Applied Industrial Technologies is expected to generate 0.62 times more return on investment than Titan Machinery. However, Applied Industrial Technologies is 1.62 times less risky than Titan Machinery. It trades about 0.12 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.05 per unit of risk. If you would invest 13,378 in Applied Industrial Technologies on August 31, 2024 and sell it today you would earn a total of 14,094 from holding Applied Industrial Technologies or generate 105.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Industrial Technologie vs. Titan Machinery
Performance |
| Timeline |
| Applied Industrial |
| Titan Machinery |
Applied Industrial and Titan Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Industrial and Titan Machinery
The main advantage of trading using opposite Applied Industrial and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Industrial position performs unexpectedly, Titan Machinery 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 Titan Machinery will offset losses from the drop in Titan Machinery's long position.| Applied Industrial vs. Global Industrial Co | Applied Industrial vs. Core Main | Applied Industrial vs. BlueLinx Holdings | Applied Industrial vs. WESCO International |
| Titan Machinery vs. DXP Enterprises | Titan Machinery vs. Watsco Inc | Titan Machinery vs. Distribution Solutions Group | Titan Machinery vs. SiteOne Landscape Supply |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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