Correlation Between Assa Abloy and Brinks

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

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

Diversification Opportunities for Assa Abloy and Brinks

0.61

Correlation Coefficient

Assa Abloy  Brinks

Poor diversification

The 3 months correlation between Assa and Brinks is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Assa Abloy AB and Brinks Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks Company and Assa Abloy 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 Assa Abloy AB are associated (or correlated) with Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks Company has no effect on the direction of Assa Abloy i.e., Assa Abloy and Brinks go up and down completely randomly.

Pair Corralation between Assa Abloy and Brinks

Assuming the 90 days horizon Assa Abloy AB is expected to generate 0.69 times more return on investment than Brinks. However, Assa Abloy AB is 1.46 times less risky than Brinks. It trades about 0.04 of its potential returns per unit of risk. Brinks Company is currently generating about -0.03 per unit of risk. If you would invest  1,391  in Assa Abloy AB on October 7, 2024 and sell it today you would earn a total of  75.00  from holding Assa Abloy AB or generate 5.39% return on investment over 90 days.

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

Assa Abloy AB  vs.  Brinks Company

Assa Abloy AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Assa Abloy AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Brinks Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brinks Company 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 fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Assa Abloy and Brinks

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

The idea behind Assa Abloy AB and Brinks Company 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..