Correlation Between NAPCO Security and Secom Co

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

By analyzing existing cross correlation between NAPCO Security Technologies and Secom Co Ltd, you can compare the effects of market volatilities on NAPCO Security and Secom Co 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 NAPCO Security with a short position of Secom Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAPCO Security and Secom Co.

Diversification Opportunities for NAPCO Security and Secom Co

-0.68

Correlation Coefficient

NAPCO Security  Secom Co

Excellent diversification

The 3 months correlation between NAPCO and Secom is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NAPCO Security Technologies and Secom Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secom Co and NAPCO Security 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 NAPCO Security Technologies are associated (or correlated) with Secom Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secom Co has no effect on the direction of NAPCO Security i.e., NAPCO Security and Secom Co go up and down completely randomly.

Pair Corralation between NAPCO Security and Secom Co

Given the investment horizon of 90 days NAPCO Security Technologies is expected to under-perform the Secom Co. In addition to that, NAPCO Security is 3.51 times more volatile than Secom Co Ltd. It trades about -0.14 of its total potential returns per unit of risk. Secom Co Ltd is currently generating about 0.04 per unit of volatility. If you would invest  848.00  in Secom Co Ltd on December 28, 2024 and sell it today you would earn a total of  22.00  from holding Secom Co Ltd or generate 2.59% return on investment over 90 days.

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

NAPCO Security Technologies  vs.  Secom Co Ltd

NAPCO Security Techn

Risk-Adjusted Performance

Very Weak

Over the last 90 days NAPCO Security Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Secom Co

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Secom Co Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Secom Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NAPCO Security and Secom Co

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

The idea behind NAPCO Security Technologies and Secom Co Ltd 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.