Correlation Between Tatton Asset and Marston’s PLC

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

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

Diversification Opportunities for Tatton Asset and Marston’s PLC

0.66

Correlation Coefficient

Tatton Asset  Marston’s PLC

Poor diversification

The 3 months correlation between Tatton and Marston’s is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Tatton Asset Management and Marstons PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marston’s PLC and Tatton Asset 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 Tatton Asset Management are associated (or correlated) with Marston’s PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marston’s PLC has no effect on the direction of Tatton Asset i.e., Tatton Asset and Marston’s PLC go up and down completely randomly.

Pair Corralation between Tatton Asset and Marston’s PLC

Assuming the 90 days trading horizon Tatton Asset Management is expected to generate 1.22 times more return on investment than Marston’s PLC. However, Tatton Asset is 1.22 times more volatile than Marstons PLC. It trades about -0.05 of its potential returns per unit of risk. Marstons PLC is currently generating about -0.14 per unit of risk. If you would invest  69,400  in Tatton Asset Management on December 23, 2024 and sell it today you would lose (5,400) from holding Tatton Asset Management or give up 7.78% of portfolio value over 90 days.

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

Tatton Asset Management  vs.  Marstons PLC

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 uncertain 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.

Marston’s PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marstons PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Tatton Asset and Marston’s PLC

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

The idea behind Tatton Asset Management and Marstons PLC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.