Correlation Between Secom Co and Telenor ASA

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

By analyzing existing cross correlation between Secom Co Ltd and Telenor ASA ADR, you can compare the effects of market volatilities on Secom Co and Telenor ASA 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 Secom Co with a short position of Telenor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Secom Co and Telenor ASA.

Diversification Opportunities for Secom Co and Telenor ASA

0.07

Correlation Coefficient

Secom Co  Telenor ASA

Significant diversification

The 3 months correlation between Secom and Telenor is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Secom Co Ltd and Telenor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA ADR and Secom Co 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 Secom Co Ltd are associated (or correlated) with Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA ADR has no effect on the direction of Secom Co i.e., Secom Co and Telenor ASA go up and down completely randomly.

Pair Corralation between Secom Co and Telenor ASA

Assuming the 90 days horizon Secom Co is expected to generate 2.71 times less return on investment than Telenor ASA. In addition to that, Secom Co is 1.16 times more volatile than Telenor ASA ADR. It trades about 0.11 of its total potential returns per unit of risk. Telenor ASA ADR is currently generating about 0.34 per unit of volatility. If you would invest  1,220  in Telenor ASA ADR on December 2, 2024 and sell it today you would earn a total of  75.00  from holding Telenor ASA ADR or generate 6.15% return on investment over 90 days.

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

Secom Co Ltd  vs.  Telenor ASA ADR

Secom Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Secom Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Secom Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Telenor ASA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telenor ASA ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Telenor ASA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Secom Co and Telenor ASA

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

The idea behind Secom Co Ltd and Telenor ASA ADR 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.