Correlation Between Tat Techno and SIFCO Industries

Can any of the company-specific risk be diversified away by investing in both Tat Techno and SIFCO 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 SIFCO 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 SIFCO Industries, you can compare the effects of market volatilities on Tat Techno and SIFCO 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 SIFCO Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tat Techno and SIFCO Industries.

Diversification Opportunities for Tat Techno and SIFCO Industries

0.56

Correlation Coefficient

Tat Techno  SIFCO Industries

Very weak diversification

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

Pair Corralation between Tat Techno and SIFCO Industries

Given the investment horizon of 90 days Tat Techno is expected to generate 1.47 times more return on investment than SIFCO Industries. However, Tat Techno is 1.47 times more volatile than SIFCO Industries. It trades about 0.01 of its potential returns per unit of risk. SIFCO Industries is currently generating about -0.14 per unit of risk. If you would invest  2,639  in Tat Techno on December 26, 2024 and sell it today you would lose (49.00) from holding Tat Techno or give up 1.86% of portfolio value over 90 days.

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

Tat Techno  vs.  SIFCO Industries

Tat Techno

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tat Techno has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Tat Techno is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

SIFCO Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days SIFCO Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Tat Techno and SIFCO Industries

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

The idea behind Tat Techno and SIFCO Industries 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.