Correlation Between Titan Machinery and Rave Restaurant
Can any of the company-specific risk be diversified away by investing in both Titan Machinery and Rave Restaurant 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 Rave Restaurant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Titan Machinery and Rave Restaurant Group, you can compare the effects of market volatilities on Titan Machinery and Rave Restaurant 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 Rave Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Machinery and Rave Restaurant.
Diversification Opportunities for Titan Machinery and Rave Restaurant
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Titan and Rave is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant Group 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 Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of Titan Machinery i.e., Titan Machinery and Rave Restaurant go up and down completely randomly.
Pair Corralation between Titan Machinery and Rave Restaurant
Given the investment horizon of 90 days Titan Machinery is expected to under-perform the Rave Restaurant. But the stock apears to be less risky and, when comparing its historical volatility, Titan Machinery is 1.16 times less risky than Rave Restaurant. The stock trades about -0.06 of its potential returns per unit of risk. The Rave Restaurant Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 214.00 in Rave Restaurant Group on September 4, 2024 and sell it today you would earn a total of 90.00 from holding Rave Restaurant Group or generate 42.06% 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. Rave Restaurant Group
Performance |
| Timeline |
| Titan Machinery |
| Rave Restaurant Group |
Titan Machinery and Rave Restaurant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Titan Machinery and Rave Restaurant
The main advantage of trading using opposite Titan Machinery and Rave Restaurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Machinery position performs unexpectedly, Rave Restaurant 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 Rave Restaurant will offset losses from the drop in Rave Restaurant's long position.| Titan Machinery vs. Global Industrial Co | Titan Machinery vs. Ferguson Plc | Titan Machinery vs. MSC Industrial Direct |
| Rave Restaurant vs. Ark Restaurants Corp | Rave Restaurant vs. One Group Hospitality | Rave Restaurant vs. Flanigans Enterprises | Rave Restaurant vs. Noble Romans |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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