Correlation Between ABB PAR and SECOM CO
Can any of the company-specific risk be diversified away by investing in both ABB PAR and SECOM CO 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 ABB PAR and SECOM CO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABB PAR AB and SECOM LTD, you can compare the effects of market volatilities on ABB PAR and SECOM CO 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 ABB PAR with a short position of SECOM CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB PAR and SECOM CO.
Diversification Opportunities for ABB PAR and SECOM CO
Weak diversification
The 3 months correlation between ABB and SECOM is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding ABB PAR AB and SECOM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECOM LTD and ABB PAR 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 ABB PAR AB are associated (or correlated) with SECOM CO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SECOM LTD has no effect on the direction of ABB PAR i.e., ABB PAR and SECOM CO go up and down completely randomly.
Pair Corralation between ABB PAR and SECOM CO
Assuming the 90 days horizon ABB PAR AB is expected to under-perform the SECOM CO. But the stock apears to be less risky and, when comparing its historical volatility, ABB PAR AB is 1.06 times less risky than SECOM CO. The stock trades about -0.35 of its potential returns per unit of risk. The SECOM LTD is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 3,240 in SECOM LTD on October 16, 2024 and sell it today you would lose (60.00) from holding SECOM LTD or give up 1.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.12% |
| Values | Daily Returns |
ABB PAR AB vs. SECOM LTD
Performance |
| Timeline |
| ABB PAR AB |
| SECOM LTD |
ABB PAR and SECOM CO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABB PAR and SECOM CO
The main advantage of trading using opposite ABB PAR and SECOM CO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABB PAR position performs unexpectedly, SECOM CO 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 SECOM CO will offset losses from the drop in SECOM CO's long position.| ABB PAR vs. PARKEN Sport Entertainment | ABB PAR vs. Nucletron Electronic Aktiengesellschaft | ABB PAR vs. Air Transport Services | ABB PAR vs. TT Electronics PLC |
| SECOM CO vs. Shenandoah Telecommunications | SECOM CO vs. Coor Service Management | SECOM CO vs. GEELY AUTOMOBILE | SECOM CO vs. TELECOM ITALRISP ADR10 |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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