Correlation Between Security Bank and Figaro Coffee

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

By analyzing existing cross correlation between Security Bank Corp and Figaro Coffee Group, you can compare the effects of market volatilities on Security Bank and Figaro Coffee 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 Security Bank with a short position of Figaro Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Security Bank and Figaro Coffee.

Diversification Opportunities for Security Bank and Figaro Coffee

0.71

Correlation Coefficient

Security Bank  Figaro Coffee

Poor diversification

The 3 months correlation between Security and Figaro is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Security Bank Corp and Figaro Coffee Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Figaro Coffee Group and Security Bank 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 Security Bank Corp are associated (or correlated) with Figaro Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Figaro Coffee Group has no effect on the direction of Security Bank i.e., Security Bank and Figaro Coffee go up and down completely randomly.

Pair Corralation between Security Bank and Figaro Coffee

Assuming the 90 days trading horizon Security Bank Corp is expected to under-perform the Figaro Coffee. But the stock apears to be less risky and, when comparing its historical volatility, Security Bank Corp is 1.21 times less risky than Figaro Coffee. The stock trades about -0.15 of its potential returns per unit of risk. The Figaro Coffee Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  85.00  in Figaro Coffee Group on December 24, 2024 and sell it today you would lose (7.00) from holding Figaro Coffee Group or give up 8.24% of portfolio value over 90 days.

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

Security Bank Corp  vs.  Figaro Coffee Group

Security Bank Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Security Bank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Figaro Coffee Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Figaro Coffee Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Security Bank and Figaro Coffee

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

The idea behind Security Bank Corp and Figaro Coffee Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.