Correlation Between Securitas and ADT
Can any of the company-specific risk be diversified away by investing in both Securitas and ADT 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 Securitas and ADT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Securitas AB and ADT Inc, you can compare the effects of market volatilities on Securitas and ADT 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 Securitas with a short position of ADT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Securitas and ADT.
Diversification Opportunities for Securitas and ADT
Very weak diversification
The 3 months correlation between Securitas and ADT is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Securitas AB and ADT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADT Inc and Securitas 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 Securitas AB are associated (or correlated) with ADT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADT Inc has no effect on the direction of Securitas i.e., Securitas and ADT go up and down completely randomly.
Pair Corralation between Securitas and ADT
Assuming the 90 days trading horizon Securitas AB is expected to generate 1.19 times more return on investment than ADT. However, Securitas is 1.19 times more volatile than ADT Inc. It trades about 0.13 of its potential returns per unit of risk. ADT Inc is currently generating about -0.45 per unit of risk. 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 |
Securitas AB vs. ADT Inc
Performance |
| Timeline |
| Securitas AB |
| ADT Inc |
Securitas and ADT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Securitas and ADT
The main advantage of trading using opposite Securitas and ADT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Securitas position performs unexpectedly, ADT 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 ADT will offset losses from the drop in ADT's long position.| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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