Correlation Between Arad Investment and TAT Technologies

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

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

Diversification Opportunities for Arad Investment and TAT Technologies

0.56

Correlation Coefficient

Arad Investment  TAT Technologies

Very weak diversification

The 3 months correlation between Arad and TAT is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Arad Investment Industrial and TAT Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAT Technologies and Arad Investment 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 Arad Investment Industrial are associated (or correlated) with TAT Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAT Technologies has no effect on the direction of Arad Investment i.e., Arad Investment and TAT Technologies go up and down completely randomly.

Pair Corralation between Arad Investment and TAT Technologies

Assuming the 90 days trading horizon Arad Investment Industrial is expected to under-perform the TAT Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Arad Investment Industrial is 1.08 times less risky than TAT Technologies. The stock trades about -0.18 of its potential returns per unit of risk. The TAT Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  952,500  in TAT Technologies on December 29, 2024 and sell it today you would earn a total of  117,500  from holding TAT Technologies or generate 12.34% return on investment over 90 days.

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

Arad Investment Industrial  vs.  TAT Technologies

Arad Investment Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arad Investment Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

TAT Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TAT Technologies are ranked lower than 6 (%) 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.

Pair Trading with Arad Investment and TAT Technologies

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

The idea behind Arad Investment Industrial and TAT Technologies 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.