Correlation Between Assa Abloy and SSC Security

Can any of the company-specific risk be diversified away by investing in both Assa Abloy and SSC Security 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 SSC Security 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 SSC Security Services, you can compare the effects of market volatilities on Assa Abloy and SSC Security 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 SSC Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Assa Abloy and SSC Security.

Diversification Opportunities for Assa Abloy and SSC Security

-0.12

Correlation Coefficient

Assa Abloy  SSC Security

Good diversification

The 3 months correlation between Assa and SSC is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Assa Abloy AB and SSC Security Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSC Security Services 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 SSC Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSC Security Services has no effect on the direction of Assa Abloy i.e., Assa Abloy and SSC Security go up and down completely randomly.

Pair Corralation between Assa Abloy and SSC Security

Assuming the 90 days horizon Assa Abloy is expected to generate 1.99 times less return on investment than SSC Security. But when comparing it to its historical volatility, Assa Abloy AB is 3.62 times less risky than SSC Security. It trades about 0.04 of its potential returns per unit of risk. SSC Security Services is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  181.00  in SSC Security Services on October 5, 2024 and sell it today you would earn a total of  2.00  from holding SSC Security Services or generate 1.1% return on investment over 90 days.

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

Assa Abloy AB  vs.  SSC Security Services

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.

SSC Security Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Assa Abloy and SSC Security

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

The idea behind Assa Abloy AB and SSC Security Services 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.