Correlation Between SECOM CO and Secom Co

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

By analyzing existing cross correlation between SECOM LTD and Secom Co Ltd, you can compare the effects of market volatilities on SECOM CO and Secom Co 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 Secom Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of SECOM CO and Secom Co.

Diversification Opportunities for SECOM CO and Secom Co

0.59

Correlation Coefficient

SECOM CO  Secom Co

Very weak diversification

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

Pair Corralation between SECOM CO and Secom Co

Assuming the 90 days horizon SECOM LTD is expected to under-perform the Secom Co. But the pink sheet apears to be less risky and, when comparing its historical volatility, SECOM LTD is 2.62 times less risky than Secom Co. The pink sheet trades about -0.26 of its potential returns per unit of risk. The Secom Co Ltd is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,769  in Secom Co Ltd on February 7, 2024 and sell it today you would lose (35.00) from holding Secom Co Ltd or give up 1.98% of portfolio value over 90 days.

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

SECOM LTD  vs.  Secom Co Ltd

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.

Secom Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Secom Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Secom Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SECOM CO and Secom Co

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

The idea behind SECOM LTD and Secom Co Ltd 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.