Correlation Between Titan Machinery and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both Titan Machinery and Century Aluminum 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 Century Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Titan Machinery and Century Aluminum, you can compare the effects of market volatilities on Titan Machinery and Century Aluminum 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 Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Machinery and Century Aluminum.
Diversification Opportunities for Titan Machinery and Century Aluminum
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Titan and Century is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of Titan Machinery i.e., Titan Machinery and Century Aluminum go up and down completely randomly.
Pair Corralation between Titan Machinery and Century Aluminum
Given the investment horizon of 90 days Titan Machinery is expected to generate 2.95 times less return on investment than Century Aluminum. But when comparing it to its historical volatility, Titan Machinery is 1.33 times less risky than Century Aluminum. It trades about 0.1 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,304 in Century Aluminum on September 12, 2024 and sell it today you would earn a total of 894.00 from holding Century Aluminum or generate 68.56% 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. Century Aluminum
Performance |
| Timeline |
| Titan Machinery |
| Century Aluminum |
Titan Machinery and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Titan Machinery and Century Aluminum
The main advantage of trading using opposite Titan Machinery and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Machinery position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum's long position.| Titan Machinery vs. DXP Enterprises | Titan Machinery vs. Watsco Inc | Titan Machinery vs. Distribution Solutions Group | Titan Machinery vs. SiteOne Landscape Supply |
| Century Aluminum vs. Fortitude Gold Corp | Century Aluminum vs. New Gold | Century Aluminum vs. Galiano Gold | Century Aluminum vs. GoldMining |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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