Correlation Between Momentum Group and Securitas

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

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

Diversification Opportunities for Momentum Group and Securitas

-0.08

Correlation Coefficient

Momentum Group  Securitas

Good diversification

The 3 months correlation between Momentum and Securitas is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Momentum Group AB and Securitas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Securitas AB and Momentum Group 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 Momentum Group AB 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 Momentum Group i.e., Momentum Group and Securitas go up and down completely randomly.

Pair Corralation between Momentum Group and Securitas

Assuming the 90 days trading horizon Momentum Group is expected to generate 2.85 times less return on investment than Securitas. In addition to that, Momentum Group is 1.27 times more volatile than Securitas AB. It trades about 0.04 of its total potential returns per unit of risk. Securitas AB is currently generating about 0.14 per unit of volatility. If you would invest  12,180  in Securitas AB on September 12, 2024 and sell it today you would earn a total of  1,865  from holding Securitas AB or generate 15.31% return on investment over 90 days.

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

Momentum Group AB  vs.  Securitas AB

Momentum Group AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Momentum Group AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Momentum Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Securitas AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Securitas AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Securitas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Momentum Group and Securitas

The main advantage of trading using opposite Momentum Group and Securitas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Momentum Group 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 Momentum Group AB 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.