Correlation Between Flex LNG and Securitas

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

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

Diversification Opportunities for Flex LNG and Securitas

-0.04

Correlation Coefficient

Flex LNG  Securitas

Good diversification

The 3 months correlation between Flex and Securitas is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Flex LNG and Securitas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Securitas AB and Flex LNG 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 Flex LNG 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 AB has no effect on the direction of Flex LNG i.e., Flex LNG and Securitas go up and down completely randomly.

Pair Corralation between Flex LNG and Securitas

Assuming the 90 days trading horizon Flex LNG is expected to under-perform the Securitas. In addition to that, Flex LNG is 1.04 times more volatile than Securitas AB. It trades about -0.14 of its total potential returns per unit of risk. Securitas AB is currently generating about 0.21 per unit of volatility. If you would invest  13,635  in Securitas AB on December 2, 2024 and sell it today you would earn a total of  1,955  from holding Securitas AB or generate 14.34% return on investment over 90 days.

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

Flex LNG  vs.  Securitas AB

Flex LNG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flex LNG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Flex LNG is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Securitas AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Securitas AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Securitas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flex LNG and Securitas

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

The idea behind Flex LNG and Securitas AB 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.