Correlation Between SigmaTron International and TTM Technologies

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

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

Diversification Opportunities for SigmaTron International and TTM Technologies

0.83

Correlation Coefficient

SigmaTron International  TTM Technologies

Very poor diversification

The 3 months correlation between SigmaTron and TTM is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SigmaTron International and TTM Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTM Technologies and SigmaTron International 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 SigmaTron International are associated (or correlated) with TTM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTM Technologies has no effect on the direction of SigmaTron International i.e., SigmaTron International and TTM Technologies go up and down completely randomly.

Pair Corralation between SigmaTron International and TTM Technologies

Given the investment horizon of 90 days SigmaTron International is expected to generate 1.25 times more return on investment than TTM Technologies. However, SigmaTron International is 1.25 times more volatile than TTM Technologies. It trades about 0.21 of its potential returns per unit of risk. TTM Technologies is currently generating about 0.15 per unit of risk. If you would invest  338.00  in SigmaTron International on March 4, 2024 and sell it today you would earn a total of  149.00  from holding SigmaTron International or generate 44.08% return on investment over 90 days.

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

SigmaTron International  vs.  TTM Technologies

SigmaTron International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SigmaTron International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent primary indicators, SigmaTron International sustained solid returns over the last few months and may actually be approaching a breakup point.

TTM Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TTM Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent primary indicators, TTM Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SigmaTron International and TTM Technologies

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

The idea behind SigmaTron International and TTM 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.