Correlation Between Tat Techno and Melrose Industries

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Can any of the company-specific risk be diversified away by investing in both Tat Techno and Melrose Industries 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 Melrose Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tat Techno and Melrose Industries PLC, you can compare the effects of market volatilities on Tat Techno and Melrose Industries 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 Melrose Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tat Techno and Melrose Industries.

Diversification Opportunities for Tat Techno and Melrose Industries

TatMelroseDiversified AwayTatMelroseDiversified Away100%
0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Tat and Melrose is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tat Techno and Melrose Industries PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melrose Industries PLC 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 Melrose Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melrose Industries PLC has no effect on the direction of Tat Techno i.e., Tat Techno and Melrose Industries go up and down completely randomly.

Pair Corralation between Tat Techno and Melrose Industries

Given the investment horizon of 90 days Tat Techno is expected to generate 0.89 times more return on investment than Melrose Industries. However, Tat Techno is 1.12 times less risky than Melrose Industries. It trades about 0.24 of its potential returns per unit of risk. Melrose Industries PLC is currently generating about 0.11 per unit of risk. If you would invest  1,823  in Tat Techno on October 31, 2024 and sell it today you would earn a total of  1,207  from holding Tat Techno or generate 66.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Tat Techno  vs.  Melrose Industries PLC

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 0102030405060
JavaScript chart by amCharts 3.21.15TATT MLSPF
       Timeline  
Tat Techno 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Tat Techno are ranked lower than 19 (%) 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1820222426283032
Melrose Industries PLC 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Melrose Industries PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Melrose Industries reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan66.577.5

Tat Techno and Melrose Industries Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-11.14-8.35-5.55-2.750.03.016.129.2212.3315.44 0.0150.0200.0250.030
JavaScript chart by amCharts 3.21.15TATT MLSPF
       Returns  

Pair Trading with Tat Techno and Melrose Industries

The main advantage of trading using opposite Tat Techno and Melrose Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tat Techno position performs unexpectedly, Melrose Industries 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 Melrose Industries will offset losses from the drop in Melrose Industries' long position.
The idea behind Tat Techno and Melrose Industries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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