Correlation Between Bytes Technology and Tatton Asset

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

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

Diversification Opportunities for Bytes Technology and Tatton Asset

-0.11

Correlation Coefficient

Bytes Technology  Tatton Asset

Good diversification

The 3 months correlation between Bytes and Tatton is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bytes Technology and Tatton Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tatton Asset Management and Bytes Technology 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 Bytes Technology are associated (or correlated) with Tatton Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tatton Asset Management has no effect on the direction of Bytes Technology i.e., Bytes Technology and Tatton Asset go up and down completely randomly.

Pair Corralation between Bytes Technology and Tatton Asset

Assuming the 90 days trading horizon Bytes Technology is expected to under-perform the Tatton Asset. But the stock apears to be less risky and, when comparing its historical volatility, Bytes Technology is 1.15 times less risky than Tatton Asset. The stock trades about -0.27 of its potential returns per unit of risk. The Tatton Asset Management is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  66,000  in Tatton Asset Management on December 2, 2024 and sell it today you would lose (2,000) from holding Tatton Asset Management or give up 3.03% of portfolio value over 90 days.

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

Bytes Technology  vs.  Tatton Asset Management

Bytes Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bytes Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Tatton Asset Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tatton Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Bytes Technology and Tatton Asset

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

The idea behind Bytes Technology and Tatton Asset Management 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.