Correlation Between Titan Machinery and Gaming Leisure

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

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

Diversification Opportunities for Titan Machinery and Gaming Leisure

0.49

Correlation Coefficient

Titan Machinery  Gaming Leisure

Very weak diversification

The 3 months correlation between Titan and Gaming is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Gaming Leisure Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming Leisure Properties 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 Gaming Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming Leisure Properties has no effect on the direction of Titan Machinery i.e., Titan Machinery and Gaming Leisure go up and down completely randomly.

Pair Corralation between Titan Machinery and Gaming Leisure

Given the investment horizon of 90 days Titan Machinery is expected to under-perform the Gaming Leisure. In addition to that, Titan Machinery is 2.51 times more volatile than Gaming Leisure Properties. It trades about -0.04 of its total potential returns per unit of risk. Gaming Leisure Properties is currently generating about -0.02 per unit of volatility. If you would invest  4,773  in Gaming Leisure Properties on January 30, 2024 and sell it today you would lose (527.00) from holding Gaming Leisure Properties or give up 11.04% of portfolio value over 90 days.

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

Titan Machinery  vs.  Gaming Leisure Properties

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. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Gaming Leisure Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gaming Leisure Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Gaming Leisure is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Titan Machinery and Gaming Leisure

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

The idea behind Titan Machinery and Gaming Leisure Properties 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.