Correlation Between Securitas and Sandvik AB

Can any of the company-specific risk be diversified away by investing in both Securitas and Sandvik 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 Sandvik 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 Sandvik AB, you can compare the effects of market volatilities on Securitas and Sandvik 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 Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Securitas and Sandvik AB.

Diversification Opportunities for Securitas and Sandvik AB

-0.12

Correlation Coefficient

Securitas  Sandvik AB

Good diversification

The 3 months correlation between Securitas and Sandvik is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Securitas AB and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik 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 Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB has no effect on the direction of Securitas i.e., Securitas and Sandvik AB go up and down completely randomly.

Pair Corralation between Securitas and Sandvik AB

Assuming the 90 days trading horizon Securitas AB is expected to generate 1.2 times more return on investment than Sandvik AB. However, Securitas is 1.2 times more volatile than Sandvik AB. It trades about 0.14 of its potential returns per unit of risk. Sandvik AB is currently generating about 0.02 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  1,875  from holding Securitas AB or generate 15.85% return on investment over 90 days.

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

Securitas AB  vs.  Sandvik AB

Securitas AB

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Securitas AB are ranked lower than 11 (%) 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.

Sandvik AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sandvik AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sandvik AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Securitas and Sandvik AB

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

The idea behind Securitas AB and Sandvik 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.