Correlation Between Tatton Asset and Auction Technology

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

By analyzing existing cross correlation between Tatton Asset Management and Auction Technology Group, you can compare the effects of market volatilities on Tatton Asset and Auction Technology 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 Tatton Asset with a short position of Auction Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tatton Asset and Auction Technology.

Diversification Opportunities for Tatton Asset and Auction Technology

0.31

Correlation Coefficient

Tatton Asset  Auction Technology

Weak diversification

The 3 months correlation between Tatton and Auction is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tatton Asset Management and Auction Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auction Technology and Tatton Asset 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 Tatton Asset Management are associated (or correlated) with Auction Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auction Technology has no effect on the direction of Tatton Asset i.e., Tatton Asset and Auction Technology go up and down completely randomly.

Pair Corralation between Tatton Asset and Auction Technology

Assuming the 90 days trading horizon Tatton Asset is expected to generate 7.28 times less return on investment than Auction Technology. But when comparing it to its historical volatility, Tatton Asset Management is 1.72 times less risky than Auction Technology. It trades about 0.04 of its potential returns per unit of risk. Auction Technology Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  41,900  in Auction Technology Group on September 26, 2024 and sell it today you would earn a total of  13,800  from holding Auction Technology Group or generate 32.94% return on investment over 90 days.

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

Tatton Asset Management  vs.  Auction Technology Group

Tatton Asset Management

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tatton Asset Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Tatton Asset is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Auction Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Auction Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tatton Asset and Auction Technology

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

The idea behind Tatton Asset Management and Auction Technology Group 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.