Correlation Between TAT Technologies and Overseas Commerce

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

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

Diversification Opportunities for TAT Technologies and Overseas Commerce

0.86

Correlation Coefficient

TAT Technologies  Overseas Commerce

Very poor diversification

The 3 months correlation between TAT and Overseas is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding TAT Technologies and Overseas Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overseas Commerce and TAT Technologies 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 TAT Technologies are associated (or correlated) with Overseas Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overseas Commerce has no effect on the direction of TAT Technologies i.e., TAT Technologies and Overseas Commerce go up and down completely randomly.

Pair Corralation between TAT Technologies and Overseas Commerce

Assuming the 90 days trading horizon TAT Technologies is expected to generate 1.79 times more return on investment than Overseas Commerce. However, TAT Technologies is 1.79 times more volatile than Overseas Commerce. It trades about 0.28 of its potential returns per unit of risk. Overseas Commerce is currently generating about 0.15 per unit of risk. If you would invest  638,400  in TAT Technologies on September 15, 2024 and sell it today you would earn a total of  305,600  from holding TAT Technologies or generate 47.87% return on investment over 90 days.

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

TAT Technologies  vs.  Overseas Commerce

TAT Technologies

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TAT Technologies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TAT Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Overseas Commerce

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Overseas Commerce are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Overseas Commerce sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TAT Technologies and Overseas Commerce

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

The idea behind TAT Technologies and Overseas Commerce 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.