Correlation Between SECOM CO and Aston Martin

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

By analyzing existing cross correlation between SECOM LTD and Aston Martin Lagonda, you can compare the effects of market volatilities on SECOM CO and Aston Martin 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 SECOM CO with a short position of Aston Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of SECOM CO and Aston Martin.

Diversification Opportunities for SECOM CO and Aston Martin

0.59

Correlation Coefficient

SECOM CO  Aston Martin

Very weak diversification

The 3 months correlation between SECOM and Aston is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding SECOM LTD and Aston Martin Lagonda in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aston Martin Lagonda and SECOM CO 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 SECOM LTD are associated (or correlated) with Aston Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aston Martin Lagonda has no effect on the direction of SECOM CO i.e., SECOM CO and Aston Martin go up and down completely randomly.

Pair Corralation between SECOM CO and Aston Martin

Assuming the 90 days horizon SECOM LTD is expected to generate 0.41 times more return on investment than Aston Martin. However, SECOM LTD is 2.41 times less risky than Aston Martin. It trades about 0.03 of its potential returns per unit of risk. Aston Martin Lagonda is currently generating about -0.01 per unit of risk. If you would invest  6,240  in SECOM LTD on January 25, 2024 and sell it today you would earn a total of  874.00  from holding SECOM LTD or generate 14.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.86%
Values	Daily Returns

SECOM LTD  vs.  Aston Martin Lagonda

SECOM LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SECOM LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Aston Martin Lagonda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aston Martin Lagonda has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SECOM CO and Aston Martin

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

The idea behind SECOM LTD and Aston Martin Lagonda 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.