Correlation Between Associated British and Secure Property

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

By analyzing existing cross correlation between Associated British Foods and Secure Property Development, you can compare the effects of market volatilities on Associated British and Secure Property 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 Associated British with a short position of Secure Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Secure Property.

Diversification Opportunities for Associated British and Secure Property

0.5

Correlation Coefficient

Associated British  Secure Property

Very weak diversification

The 3 months correlation between Associated and Secure is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Secure Property Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secure Property Deve and Associated British 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 Associated British Foods are associated (or correlated) with Secure Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secure Property Deve has no effect on the direction of Associated British i.e., Associated British and Secure Property go up and down completely randomly.

Pair Corralation between Associated British and Secure Property

Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the Secure Property. But the stock apears to be less risky and, when comparing its historical volatility, Associated British Foods is 2.94 times less risky than Secure Property. The stock trades about -0.22 of its potential returns per unit of risk. The Secure Property Development is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  450.00  in Secure Property Development on December 4, 2024 and sell it today you would lose (75.00) from holding Secure Property Development or give up 16.67% of portfolio value over 90 days.

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

Associated British Foods  vs.  Secure Property Development

Associated British Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Secure Property Deve

Risk-Adjusted Performance

Very Weak

Over the last 90 days Secure Property Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Associated British and Secure Property

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

The idea behind Associated British Foods and Secure Property Development 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.