Correlation Between Securitas and Nexam Chemical

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

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

Diversification Opportunities for Securitas and Nexam Chemical

-0.69

Correlation Coefficient

Securitas  Nexam Chemical

Excellent diversification

The 3 months correlation between Securitas and Nexam is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Securitas AB and Nexam Chemical Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexam Chemical Holding 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 Nexam Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexam Chemical Holding has no effect on the direction of Securitas i.e., Securitas and Nexam Chemical go up and down completely randomly.

Pair Corralation between Securitas and Nexam Chemical

Assuming the 90 days trading horizon Securitas AB is expected to generate 0.52 times more return on investment than Nexam Chemical. However, Securitas AB is 1.93 times less risky than Nexam Chemical. It trades about 0.15 of its potential returns per unit of risk. Nexam Chemical Holding is currently generating about -0.1 per unit of risk. If you would invest  11,830  in Securitas AB on September 4, 2024 and sell it today you would earn a total of  2,055  from holding Securitas AB or generate 17.37% return on investment over 90 days.

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

Securitas AB  vs.  Nexam Chemical Holding

Securitas AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Securitas AB are ranked lower than 12 (%) 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.

Nexam Chemical Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Securitas and Nexam Chemical

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

The idea behind Securitas AB and Nexam Chemical Holding 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 Transaction History module to view history of all your transactions and understand their impact on performance.