Correlation Between SECURITAS and Paragon Care

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

By analyzing existing cross correlation between SECURITAS B and Paragon Care Limited, you can compare the effects of market volatilities on SECURITAS and Paragon Care 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 Paragon Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of SECURITAS and Paragon Care.

Diversification Opportunities for SECURITAS and Paragon Care

0.58

Correlation Coefficient

SECURITAS  Paragon Care

Very weak diversification

The 3 months correlation between SECURITAS and Paragon is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SECURITAS B and Paragon Care Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paragon Care Limited 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 Paragon Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paragon Care Limited has no effect on the direction of SECURITAS i.e., SECURITAS and Paragon Care go up and down completely randomly.

Pair Corralation between SECURITAS and Paragon Care

Assuming the 90 days trading horizon SECURITAS B is expected to generate 0.95 times more return on investment than Paragon Care. However, SECURITAS B is 1.05 times less risky than Paragon Care. It trades about 0.22 of its potential returns per unit of risk. Paragon Care Limited is currently generating about 0.15 per unit of risk. If you would invest  910.00  in SECURITAS B on October 6, 2024 and sell it today you would earn a total of  284.00  from holding SECURITAS B or generate 31.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

SECURITAS B   vs.  Paragon Care Limited

SECURITAS B

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SECURITAS B are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SECURITAS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Paragon Care Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paragon Care Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Paragon Care may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SECURITAS and Paragon Care

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

The idea behind SECURITAS B and Paragon Care Limited 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.