Correlation Between SECURITAS and TC Energy

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

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

Diversification Opportunities for SECURITAS and TC Energy

0.62

Correlation Coefficient

SECURITAS  TC Energy

Poor diversification

The 3 months correlation between SECURITAS and TRS is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SECURITAS B and TC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy has no effect on the direction of SECURITAS i.e., SECURITAS and TC Energy go up and down completely randomly.

Pair Corralation between SECURITAS and TC Energy

Assuming the 90 days trading horizon SECURITAS B is expected to generate 1.49 times more return on investment than TC Energy. However, SECURITAS is 1.49 times more volatile than TC Energy. It trades about 0.16 of its potential returns per unit of risk. TC Energy is currently generating about 0.14 per unit of risk. If you would invest  786.00  in SECURITAS B on October 4, 2024 and sell it today you would earn a total of  417.00  from holding SECURITAS B or generate 53.05% return on investment over 90 days.

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

SECURITAS B   vs.  TC Energy

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 fragile basic indicators, SECURITAS unveiled solid returns over the last few months and may actually be approaching a breakup point.

TC Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TC Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SECURITAS and TC Energy

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

The idea behind SECURITAS B and TC Energy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.