Correlation Between Paragon Banking and SECURITAS

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

By analyzing existing cross correlation between Paragon Banking Group and SECURITAS B , you can compare the effects of market volatilities on Paragon Banking 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 Paragon Banking with a short position of SECURITAS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paragon Banking and SECURITAS.

Diversification Opportunities for Paragon Banking and SECURITAS

0.54

Correlation Coefficient

Paragon Banking  SECURITAS

Very weak diversification

The 3 months correlation between Paragon and SECURITAS is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Paragon Banking Group and SECURITAS B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECURITAS B and Paragon Banking 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 Paragon Banking Group 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 B has no effect on the direction of Paragon Banking i.e., Paragon Banking and SECURITAS go up and down completely randomly.

Pair Corralation between Paragon Banking and SECURITAS

Assuming the 90 days trading horizon Paragon Banking is expected to generate 2.46 times less return on investment than SECURITAS. But when comparing it to its historical volatility, Paragon Banking Group is 1.32 times less risky than SECURITAS. It trades about 0.07 of its potential returns per unit of risk. SECURITAS B is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  390.00  in SECURITAS B on October 22, 2024 and sell it today you would earn a total of  792.00  from holding SECURITAS B or generate 203.08% return on investment over 90 days.

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

Paragon Banking Group  vs.  SECURITAS B

Paragon Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paragon Banking Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Paragon Banking is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

SECURITAS B

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SECURITAS B are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SECURITAS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paragon Banking and SECURITAS

The main advantage of trading using opposite Paragon Banking and SECURITAS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paragon Banking 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's long position.

The idea behind Paragon Banking Group and SECURITAS B 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.