Correlation Between ADT and Securitas
Can any of the company-specific risk be diversified away by investing in both ADT 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 ADT and Securitas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADT Inc and Securitas AB, you can compare the effects of market volatilities on ADT 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 ADT with a short position of Securitas. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADT and Securitas.
Diversification Opportunities for ADT and Securitas
Very weak diversification
The 3 months correlation between ADT and Securitas is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ADT Inc and Securitas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Securitas AB and ADT 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 ADT Inc 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 ADT i.e., ADT and Securitas go up and down completely randomly.
Pair Corralation between ADT and Securitas
Assuming the 90 days horizon ADT Inc is expected to under-perform the Securitas. But the stock apears to be less risky and, when comparing its historical volatility, ADT Inc is 1.19 times less risky than Securitas. The stock trades about -0.45 of its potential returns per unit of risk. The Securitas AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,166 in Securitas AB on September 28, 2024 and sell it today you would earn a total of 36.00 from holding Securitas AB or generate 3.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
ADT Inc vs. Securitas AB
Performance |
| Timeline |
| ADT Inc |
| Securitas AB |
ADT and Securitas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADT and Securitas
The main advantage of trading using opposite ADT and Securitas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADT 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 ADT Inc 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.| Securitas vs. DATAGROUP SE | Securitas vs. LION ONE METALS | Securitas vs. Harmony Gold Mining | Securitas vs. INFORMATION SVC GRP |
Check out your portfolio center.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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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