Correlation Between Montauk Renewables and Securitas

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

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

Diversification Opportunities for Montauk Renewables and Securitas

0.1

Correlation Coefficient

Montauk Renewables  Securitas

Average diversification

The 3 months correlation between Montauk and Securitas is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Securitas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Securitas AB and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and Securitas go up and down completely randomly.

Pair Corralation between Montauk Renewables and Securitas

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Securitas. In addition to that, Montauk Renewables is 3.66 times more volatile than Securitas AB. It trades about -0.18 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  1,207  in Securitas AB on September 4, 2024 and sell it today you would earn a total of  92.00  from holding Securitas AB or generate 7.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Montauk Renewables  vs.  Securitas AB

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Securitas AB

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Securitas AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental drivers, Securitas showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Montauk Renewables and Securitas

The main advantage of trading using opposite Montauk Renewables and Securitas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.