Correlation Between SURETRACK MON and London Security

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

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

Diversification Opportunities for SURETRACK MON and London Security

-0.52

Correlation Coefficient

SURETRACK MON  London Security

Excellent diversification

The 3 months correlation between SURETRACK and London is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding SURETRACK MON and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc and SURETRACK MON 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 SURETRACK MON are associated (or correlated) with London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of SURETRACK MON i.e., SURETRACK MON and London Security go up and down completely randomly.

Pair Corralation between SURETRACK MON and London Security

Assuming the 90 days trading horizon SURETRACK MON is expected to generate 7.52 times more return on investment than London Security. However, SURETRACK MON is 7.52 times more volatile than London Security Plc. It trades about 0.16 of its potential returns per unit of risk. London Security Plc is currently generating about -0.18 per unit of risk. If you would invest  23.00  in SURETRACK MON on September 3, 2024 and sell it today you would earn a total of  25.00  from holding SURETRACK MON or generate 108.7% return on investment over 90 days.

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

SURETRACK MON   vs.  London Security Plc

SURETRACK MON

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SURETRACK MON are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SURETRACK MON exhibited solid returns over the last few months and may actually be approaching a breakup point.

London Security Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days London Security Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SURETRACK MON and London Security

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

The idea behind SURETRACK MON and London Security 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..