Correlation Between AB SKF and Securitas

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

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

Diversification Opportunities for AB SKF and Securitas

0.79

Correlation Coefficient

AB SKF  Securitas

Poor diversification

The 3 months correlation between SKF-B and Securitas is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF and Securitas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Securitas AB and AB SKF 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 AB SKF are associated (or correlated) with Securitas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Securitas AB has no effect on the direction of AB SKF i.e., AB SKF and Securitas go up and down completely randomly.

Pair Corralation between AB SKF and Securitas

Assuming the 90 days trading horizon AB SKF is expected to generate 1.05 times more return on investment than Securitas. However, AB SKF is 1.05 times more volatile than Securitas AB. It trades about 0.15 of its potential returns per unit of risk. Securitas AB is currently generating about 0.14 per unit of risk. If you would invest  18,335  in AB SKF on September 4, 2024 and sell it today you would earn a total of  3,165  from holding AB SKF or generate 17.26% return on investment over 90 days.

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

AB SKF  vs.  Securitas AB

AB SKF

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AB SKF unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with AB SKF and Securitas

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

The idea behind AB SKF and Securitas 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.