Correlation Between Assa Abloy and Securitas

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

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

Diversification Opportunities for Assa Abloy and Securitas

0.84

Correlation Coefficient

Assa Abloy  Securitas

Very poor diversification

The 3 months correlation between Assa and Securitas is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Assa Abloy AB and Securitas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Securitas AB and Assa Abloy 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 Assa Abloy AB are associated (or correlated) with Securitas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Securitas AB has no effect on the direction of Assa Abloy i.e., Assa Abloy and Securitas go up and down completely randomly.

Pair Corralation between Assa Abloy and Securitas

Assuming the 90 days horizon Assa Abloy AB is expected to generate 0.84 times more return on investment than Securitas. However, Assa Abloy AB is 1.19 times less risky than Securitas. It trades about -0.07 of its potential returns per unit of risk. Securitas AB is currently generating about -0.4 per unit of risk. If you would invest  1,464  in Assa Abloy AB on January 25, 2024 and sell it today you would lose (26.00) from holding Assa Abloy AB or give up 1.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Assa Abloy AB  vs.  Securitas AB

Assa Abloy AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Assa Abloy AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Assa Abloy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Securitas AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Securitas AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Securitas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Assa Abloy and Securitas

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

The idea behind Assa Abloy AB and Securitas AB 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.