Correlation Between Safran SA and Tat Techno

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

By analyzing existing cross correlation between Safran SA and Tat Techno, you can compare the effects of market volatilities on Safran SA and Tat Techno 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 Safran SA with a short position of Tat Techno. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safran SA and Tat Techno.

Diversification Opportunities for Safran SA and Tat Techno

0.4

Correlation Coefficient

Safran SA  Tat Techno

Very weak diversification

The 3 months correlation between Safran and Tat is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Safran SA and Tat Techno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tat Techno and Safran SA 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 Safran SA are associated (or correlated) with Tat Techno. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tat Techno has no effect on the direction of Safran SA i.e., Safran SA and Tat Techno go up and down completely randomly.

Pair Corralation between Safran SA and Tat Techno

Assuming the 90 days horizon Safran SA is expected to generate 5.23 times less return on investment than Tat Techno. But when comparing it to its historical volatility, Safran SA is 2.73 times less risky than Tat Techno. It trades about 0.13 of its potential returns per unit of risk. Tat Techno is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,826  in Tat Techno on September 4, 2024 and sell it today you would earn a total of  434.00  from holding Tat Techno or generate 23.77% return on investment over 90 days.

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

Safran SA  vs.  Tat Techno

Safran SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safran SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Safran SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tat Techno

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tat Techno are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Tat Techno unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safran SA and Tat Techno

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

The idea behind Safran SA and Tat Techno 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.