Correlation Between Figaro Coffee and Security Bank

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

By analyzing existing cross correlation between Figaro Coffee Group and Security Bank Corp, you can compare the effects of market volatilities on Figaro Coffee and Security Bank 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 Figaro Coffee with a short position of Security Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Figaro Coffee and Security Bank.

Diversification Opportunities for Figaro Coffee and Security Bank

0.48

Correlation Coefficient

Figaro Coffee  Security Bank

Very weak diversification

The 3 months correlation between Figaro and Security is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Figaro Coffee Group and Security Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Bank Corp and Figaro Coffee 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 Figaro Coffee Group are associated (or correlated) with Security Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Bank Corp has no effect on the direction of Figaro Coffee i.e., Figaro Coffee and Security Bank go up and down completely randomly.

Pair Corralation between Figaro Coffee and Security Bank

Assuming the 90 days trading horizon Figaro Coffee is expected to generate 3.13 times less return on investment than Security Bank. But when comparing it to its historical volatility, Figaro Coffee Group is 1.09 times less risky than Security Bank. It trades about 0.06 of its potential returns per unit of risk. Security Bank Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6,480  in Security Bank Corp on September 4, 2024 and sell it today you would earn a total of  2,035  from holding Security Bank Corp or generate 31.4% return on investment over 90 days.

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

Figaro Coffee Group  vs.  Security Bank Corp

Figaro Coffee Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Figaro Coffee Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Figaro Coffee may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Security Bank Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Security Bank Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Security Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Figaro Coffee and Security Bank

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

The idea behind Figaro Coffee Group and Security Bank Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.