Correlation Between Securitas and Valens

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

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

Diversification Opportunities for Securitas and Valens

0.54

Correlation Coefficient

Securitas  Valens

Very weak diversification

The 3 months correlation between Securitas and Valens is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Securitas AB and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 AB are associated (or correlated) with Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of Securitas i.e., Securitas and Valens go up and down completely randomly.

Pair Corralation between Securitas and Valens

Assuming the 90 days horizon Securitas AB is expected to generate 0.57 times more return on investment than Valens. However, Securitas AB is 1.77 times less risky than Valens. It trades about 0.06 of its potential returns per unit of risk. Valens is currently generating about -0.02 per unit of risk. If you would invest  910.00  in Securitas AB on October 13, 2024 and sell it today you would earn a total of  375.00  from holding Securitas AB or generate 41.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	61.69%
Values	Daily Returns

Securitas AB  vs.  Valens

Securitas AB

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Securitas AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating fundamental drivers, Securitas reported solid returns over the last few months and may actually be approaching a breakup point.

Valens

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile essential indicators, Valens displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Securitas and Valens

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

The idea behind Securitas AB and Valens 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.