Correlation Between Tat Techno and Sembcorp Marine

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

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

Diversification Opportunities for Tat Techno and Sembcorp Marine

0.22

Correlation Coefficient

Tat Techno  Sembcorp Marine

Modest diversification

The 3 months correlation between Tat and Sembcorp is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Tat Techno and Sembcorp Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sembcorp Marine and Tat Techno 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 Techno are associated (or correlated) with Sembcorp Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sembcorp Marine has no effect on the direction of Tat Techno i.e., Tat Techno and Sembcorp Marine go up and down completely randomly.

Pair Corralation between Tat Techno and Sembcorp Marine

Given the investment horizon of 90 days Tat Techno is expected to generate 0.72 times more return on investment than Sembcorp Marine. However, Tat Techno is 1.38 times less risky than Sembcorp Marine. It trades about 0.25 of its potential returns per unit of risk. Sembcorp Marine is currently generating about -0.01 per unit of risk. 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	Very Weak
Accuracy	95.45%
Values	Daily Returns

Tat Techno  vs.  Sembcorp Marine

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.

Sembcorp Marine

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sembcorp Marine are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Sembcorp Marine reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tat Techno and Sembcorp Marine

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

The idea behind Tat Techno and Sembcorp Marine 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.