Correlation Between SECURITAS and GREENLIGHT CAPRE

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

By analyzing existing cross correlation between SECURITAS B and GREENLIGHT CAPRE A, you can compare the effects of market volatilities on SECURITAS and GREENLIGHT CAPRE 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 SECURITAS with a short position of GREENLIGHT CAPRE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SECURITAS and GREENLIGHT CAPRE.

Diversification Opportunities for SECURITAS and GREENLIGHT CAPRE

-0.61

Correlation Coefficient

SECURITAS  GREENLIGHT CAPRE

Excellent diversification

The 3 months correlation between SECURITAS and GREENLIGHT is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding SECURITAS B and GREENLIGHT CAPRE A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREENLIGHT CAPRE A and SECURITAS 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 SECURITAS B are associated (or correlated) with GREENLIGHT CAPRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREENLIGHT CAPRE A has no effect on the direction of SECURITAS i.e., SECURITAS and GREENLIGHT CAPRE go up and down completely randomly.

Pair Corralation between SECURITAS and GREENLIGHT CAPRE

Assuming the 90 days trading horizon SECURITAS B is expected to generate 0.62 times more return on investment than GREENLIGHT CAPRE. However, SECURITAS B is 1.63 times less risky than GREENLIGHT CAPRE. It trades about 0.13 of its potential returns per unit of risk. GREENLIGHT CAPRE A is currently generating about -0.06 per unit of risk. If you would invest  1,203  in SECURITAS B on December 25, 2024 and sell it today you would earn a total of  126.00  from holding SECURITAS B or generate 10.47% return on investment over 90 days.

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

SECURITAS B   vs.  GREENLIGHT CAPRE A

SECURITAS B

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SECURITAS B are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SECURITAS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GREENLIGHT CAPRE A

Risk-Adjusted Performance

Very Weak

Over the last 90 days GREENLIGHT CAPRE A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SECURITAS and GREENLIGHT CAPRE

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

The idea behind SECURITAS B and GREENLIGHT CAPRE A 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.