Correlation Between Titan Machinery and Amazon

Can any of the company-specific risk be diversified away by investing in both Titan Machinery and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Titan Machinery and Amazon Inc, you can compare the effects of market volatilities on Titan Machinery and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Machinery and Amazon.

Diversification Opportunities for Titan Machinery and Amazon

-0.15

Correlation Coefficient

Titan Machinery  Amazon

Good diversification

The 3 months correlation between Titan and Amazon is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Titan Machinery i.e., Titan Machinery and Amazon go up and down completely randomly.

Pair Corralation between Titan Machinery and Amazon

Assuming the 90 days horizon Titan Machinery is expected to under-perform the Amazon. In addition to that, Titan Machinery is 3.03 times more volatile than Amazon Inc. It trades about -0.43 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.04 per unit of volatility. If you would invest  16,890  in Amazon Inc on March 21, 2024 and sell it today you would earn a total of  164.00  from holding Amazon Inc or generate 0.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Titan Machinery  vs.  Amazon Inc

Titan Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Amazon Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Amazon is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Titan Machinery and Amazon

The main advantage of trading using opposite Titan Machinery and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Machinery position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.

The idea behind Titan Machinery and Amazon Inc 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.