Correlation Between Securitas and Ngenic AB

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

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

Diversification Opportunities for Securitas and Ngenic AB

-0.2

Correlation Coefficient

Securitas  Ngenic AB

Good diversification

The 3 months correlation between Securitas and Ngenic is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Securitas AB and Ngenic AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ngenic AB 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 Ngenic AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ngenic AB has no effect on the direction of Securitas i.e., Securitas and Ngenic AB go up and down completely randomly.

Pair Corralation between Securitas and Ngenic AB

Assuming the 90 days trading horizon Securitas is expected to generate 2.08 times less return on investment than Ngenic AB. But when comparing it to its historical volatility, Securitas AB is 6.88 times less risky than Ngenic AB. It trades about 0.14 of its potential returns per unit of risk. Ngenic AB is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  307.00  in Ngenic AB on September 12, 2024 and sell it today you would lose (26.00) from holding Ngenic AB or give up 8.47% of portfolio value over 90 days.

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

Securitas AB  vs.  Ngenic AB

Securitas AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Securitas AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Securitas sustained solid returns over the last few months and may actually be approaching a breakup point.

Ngenic AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ngenic AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Ngenic AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Securitas and Ngenic AB

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

The idea behind Securitas AB and Ngenic AB 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.