Correlation Between SECURE ELECTRONIC and NIGERIAN BREWERIES

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

By analyzing existing cross correlation between SECURE ELECTRONIC TECHNOLOGY and NIGERIAN BREWERIES PLC, you can compare the effects of market volatilities on SECURE ELECTRONIC and NIGERIAN BREWERIES 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 SECURE ELECTRONIC with a short position of NIGERIAN BREWERIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of SECURE ELECTRONIC and NIGERIAN BREWERIES.

Diversification Opportunities for SECURE ELECTRONIC and NIGERIAN BREWERIES

0.1

Correlation Coefficient

SECURE ELECTRONIC  NIGERIAN BREWERIES

Average diversification

The 3 months correlation between SECURE and NIGERIAN is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding SECURE ELECTRONIC TECHNOLOGY and NIGERIAN BREWERIES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIGERIAN BREWERIES PLC and SECURE ELECTRONIC 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 SECURE ELECTRONIC TECHNOLOGY are associated (or correlated) with NIGERIAN BREWERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIGERIAN BREWERIES PLC has no effect on the direction of SECURE ELECTRONIC i.e., SECURE ELECTRONIC and NIGERIAN BREWERIES go up and down completely randomly.

Pair Corralation between SECURE ELECTRONIC and NIGERIAN BREWERIES

Assuming the 90 days trading horizon SECURE ELECTRONIC TECHNOLOGY is expected to generate 1.76 times more return on investment than NIGERIAN BREWERIES. However, SECURE ELECTRONIC is 1.76 times more volatile than NIGERIAN BREWERIES PLC. It trades about 0.07 of its potential returns per unit of risk. NIGERIAN BREWERIES PLC is currently generating about -0.01 per unit of risk. If you would invest  22.00  in SECURE ELECTRONIC TECHNOLOGY on September 13, 2024 and sell it today you would earn a total of  35.00  from holding SECURE ELECTRONIC TECHNOLOGY or generate 159.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.63%
Values	Daily Returns

SECURE ELECTRONIC TECHNOLOGY  vs.  NIGERIAN BREWERIES PLC

SECURE ELECTRONIC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SECURE ELECTRONIC TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, SECURE ELECTRONIC is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

NIGERIAN BREWERIES PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIGERIAN BREWERIES PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NIGERIAN BREWERIES is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SECURE ELECTRONIC and NIGERIAN BREWERIES

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

The idea behind SECURE ELECTRONIC TECHNOLOGY and NIGERIAN BREWERIES PLC 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..