Correlation Between Towle Deep and Short Duration

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

By analyzing existing cross correlation between Towle Deep Value and Short Duration Income, you can compare the effects of market volatilities on Towle Deep and Short Duration 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 Towle Deep with a short position of Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Towle Deep and Short Duration.

Diversification Opportunities for Towle Deep and Short Duration

0.64

Correlation Coefficient

Towle Deep  Short Duration

Poor diversification

The 3 months correlation between Towle and Short is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Towle Deep Value and Short Duration Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Income and Towle Deep 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 Towle Deep Value are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Income has no effect on the direction of Towle Deep i.e., Towle Deep and Short Duration go up and down completely randomly.

Pair Corralation between Towle Deep and Short Duration

Assuming the 90 days horizon Towle Deep Value is expected to generate 15.15 times more return on investment than Short Duration. However, Towle Deep is 15.15 times more volatile than Short Duration Income. It trades about 0.09 of its potential returns per unit of risk. Short Duration Income is currently generating about 0.12 per unit of risk. If you would invest  1,329  in Towle Deep Value on May 5, 2025 and sell it today you would earn a total of  114.00  from holding Towle Deep Value or generate 8.58% return on investment over 90 days.

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

Towle Deep Value  vs.  Short Duration Income

Towle Deep Value

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Towle Deep Value are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Towle Deep may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Short Duration Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Short Duration Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Towle Deep and Short Duration

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

The idea behind Towle Deep Value and Short Duration Income 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.