Correlation Between Titan Machinery and Applied Industrial
Can any of the company-specific risk be diversified away by investing in both Titan Machinery and Applied Industrial 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 Applied Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Titan Machinery and Applied Industrial Technologies, you can compare the effects of market volatilities on Titan Machinery and Applied Industrial 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 Applied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Machinery and Applied Industrial.
Diversification Opportunities for Titan Machinery and Applied Industrial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Titan and Applied is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial 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 Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of Titan Machinery i.e., Titan Machinery and Applied Industrial go up and down completely randomly.
Pair Corralation between Titan Machinery and Applied Industrial
Given the investment horizon of 90 days Titan Machinery is expected to under-perform the Applied Industrial. In addition to that, Titan Machinery is 1.62 times more volatile than Applied Industrial Technologies. It trades about -0.06 of its total potential returns per unit of risk. Applied Industrial Technologies is currently generating about 0.13 per unit of volatility. If you would invest 16,301 in Applied Industrial Technologies on September 2, 2024 and sell it today you would earn a total of 11,171 from holding Applied Industrial Technologies or generate 68.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Titan Machinery vs. Applied Industrial Technologie
Performance |
| Timeline |
| Titan Machinery |
| Applied Industrial |
Titan Machinery and Applied Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Titan Machinery and Applied Industrial
The main advantage of trading using opposite Titan Machinery and Applied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Machinery position performs unexpectedly, Applied Industrial 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 Applied Industrial will offset losses from the drop in Applied Industrial's long position.| Titan Machinery vs. Oil States International | Titan Machinery vs. Oceaneering International | Titan Machinery vs. Geospace Technologies | Titan Machinery vs. Newpark Resources |
| Applied Industrial vs. Oil States International | Applied Industrial vs. Oceaneering International | Applied Industrial vs. Geospace Technologies | Applied Industrial vs. Newpark Resources |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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