Correlation Between Tetragon Financial and Tavistock Investments

Can any of the company-specific risk be diversified away by investing in both Tetragon Financial and Tavistock Investments 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 Tetragon Financial and Tavistock Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tetragon Financial Group and Tavistock Investments Plc, you can compare the effects of market volatilities on Tetragon Financial and Tavistock Investments 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 Tetragon Financial with a short position of Tavistock Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tetragon Financial and Tavistock Investments.

Diversification Opportunities for Tetragon Financial and Tavistock Investments

0.61

Correlation Coefficient

Tetragon Financial  Tavistock Investments

Poor diversification

The 3 months correlation between Tetragon and Tavistock is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tetragon Financial Group and Tavistock Investments Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tavistock Investments Plc and Tetragon Financial 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 Tetragon Financial Group are associated (or correlated) with Tavistock Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tavistock Investments Plc has no effect on the direction of Tetragon Financial i.e., Tetragon Financial and Tavistock Investments go up and down completely randomly.

Pair Corralation between Tetragon Financial and Tavistock Investments

Assuming the 90 days trading horizon Tetragon Financial is expected to generate 2.12 times less return on investment than Tavistock Investments. But when comparing it to its historical volatility, Tetragon Financial Group is 1.03 times less risky than Tavistock Investments. It trades about 0.11 of its potential returns per unit of risk. Tavistock Investments Plc is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  416.00  in Tavistock Investments Plc on October 11, 2024 and sell it today you would earn a total of  9.00  from holding Tavistock Investments Plc or generate 2.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Tetragon Financial Group  vs.  Tavistock Investments Plc

Tetragon Financial

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tetragon Financial Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Tetragon Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tavistock Investments Plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tavistock Investments Plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Tavistock Investments unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tetragon Financial and Tavistock Investments

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

The idea behind Tetragon Financial Group and Tavistock Investments 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.