Correlation Between SECOM CO and Securitas

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

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

Diversification Opportunities for SECOM CO and Securitas

-0.02

Correlation Coefficient

SECOM CO  Securitas

Good diversification

The 3 months correlation between SECOM and Securitas is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SECOM LTD and Securitas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Securitas AB 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 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 SECOM CO i.e., SECOM CO and Securitas go up and down completely randomly.

Pair Corralation between SECOM CO and Securitas

Assuming the 90 days horizon SECOM LTD is expected to under-perform the Securitas. But the pink sheet apears to be less risky and, when comparing its historical volatility, SECOM LTD is 1.61 times less risky than Securitas. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Securitas AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  962.00  in Securitas AB on January 24, 2024 and sell it today you would earn a total of  13.00  from holding Securitas AB or generate 1.35% return on investment over 90 days.

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

SECOM LTD  vs.  Securitas AB

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 nearly stable essential indicators, SECOM CO is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 SECOM CO and Securitas

The main advantage of trading using opposite SECOM CO and Securitas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SECOM CO 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 SECOM LTD 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.