Correlation Between Multi Retail and TAT Technologies

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

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

Diversification Opportunities for Multi Retail and TAT Technologies

0.79

Correlation Coefficient

Multi Retail  TAT Technologies

Poor diversification

The 3 months correlation between Multi and TAT is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Multi Retail Group and TAT Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAT Technologies and Multi Retail 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 Multi Retail Group 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 Multi Retail i.e., Multi Retail and TAT Technologies go up and down completely randomly.

Pair Corralation between Multi Retail and TAT Technologies

Assuming the 90 days trading horizon Multi Retail Group is expected to generate 0.79 times more return on investment than TAT Technologies. However, Multi Retail Group is 1.27 times less risky than TAT Technologies. It trades about 0.16 of its potential returns per unit of risk. TAT Technologies is currently generating about 0.0 per unit of risk. If you would invest  113,900  in Multi Retail Group on December 21, 2024 and sell it today you would earn a total of  21,700  from holding Multi Retail Group or generate 19.05% return on investment over 90 days.

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

Multi Retail Group  vs.  TAT Technologies

Multi Retail Group

Risk-Adjusted Performance

Good

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

TAT Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days TAT Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TAT Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Multi Retail and TAT Technologies

The main advantage of trading using opposite Multi Retail and TAT Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi Retail 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 Multi Retail Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.