Correlation Between SSC Security and Resideo Technologies

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

By analyzing existing cross correlation between SSC Security Services and Resideo Technologies, you can compare the effects of market volatilities on SSC Security and Resideo Technologies 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 SSC Security with a short position of Resideo Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSC Security and Resideo Technologies.

Diversification Opportunities for SSC Security and Resideo Technologies

0.78

Correlation Coefficient

SSC Security  Resideo Technologies

Poor diversification

The 3 months correlation between SSC and Resideo is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SSC Security Services and Resideo Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resideo Technologies and SSC Security 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 SSC Security Services are associated (or correlated) with Resideo Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resideo Technologies has no effect on the direction of SSC Security i.e., SSC Security and Resideo Technologies go up and down completely randomly.

Pair Corralation between SSC Security and Resideo Technologies

Assuming the 90 days horizon SSC Security is expected to generate 9.37 times less return on investment than Resideo Technologies. But when comparing it to its historical volatility, SSC Security Services is 2.23 times less risky than Resideo Technologies. It trades about 0.05 of its potential returns per unit of risk. Resideo Technologies is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,917  in Resideo Technologies on September 14, 2024 and sell it today you would earn a total of  702.00  from holding Resideo Technologies or generate 36.62% return on investment over 90 days.

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

SSC Security Services  vs.  Resideo Technologies

SSC Security Services

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SSC Security Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SSC Security is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Resideo Technologies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Resideo Technologies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Resideo Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SSC Security and Resideo Technologies

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

The idea behind SSC Security Services and Resideo Technologies 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.