Correlation Between Gap, and Titan Machinery
Can any of the company-specific risk be diversified away by investing in both Gap, 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 Gap, and Titan Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Gap, and Titan Machinery, you can compare the effects of market volatilities on Gap, 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 Gap, with a short position of Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and Titan Machinery.
Diversification Opportunities for Gap, and Titan Machinery
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gap, and Titan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and Gap, 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 The Gap, 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 Gap, i.e., Gap, and Titan Machinery go up and down completely randomly.
Pair Corralation between Gap, and Titan Machinery
Considering the 90-day investment horizon Gap, is expected to generate 1.13 times less return on investment than Titan Machinery. But when comparing it to its historical volatility, The Gap, is 1.06 times less risky than Titan Machinery. It trades about 0.16 of its potential returns per unit of risk. Titan Machinery is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,405 in Titan Machinery on August 30, 2024 and sell it today you would earn a total of 202.00 from holding Titan Machinery or generate 14.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Gap, vs. Titan Machinery
Performance |
| Timeline |
| Gap, |
| Titan Machinery |
Gap, and Titan Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gap, and Titan Machinery
The main advantage of trading using opposite Gap, and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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.The idea behind The Gap, and Titan Machinery 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.| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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