Correlation Between Securitas and Skanska AB
Can any of the company-specific risk be diversified away by investing in both Securitas and Skanska AB 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 Skanska AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Securitas AB and Skanska AB, you can compare the effects of market volatilities on Securitas and Skanska AB 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 Skanska AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Securitas and Skanska AB.
Diversification Opportunities for Securitas and Skanska AB
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Securitas and Skanska is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Securitas AB and Skanska AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skanska AB 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 Skanska AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skanska AB has no effect on the direction of Securitas i.e., Securitas and Skanska AB go up and down completely randomly.
Pair Corralation between Securitas and Skanska AB
Assuming the 90 days trading horizon Securitas AB is expected to generate 0.95 times more return on investment than Skanska AB. However, Securitas AB is 1.05 times less risky than Skanska AB. It trades about 0.07 of its potential returns per unit of risk. Skanska AB is currently generating about 0.05 per unit of risk. If you would invest 8,120 in Securitas AB on August 26, 2024 and sell it today you would earn a total of 5,385 from holding Securitas AB or generate 66.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Securitas AB vs. Skanska AB
Performance |
| Timeline |
| Securitas AB |
| Skanska AB |
Securitas and Skanska AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Securitas and Skanska AB
The main advantage of trading using opposite Securitas and Skanska AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Securitas position performs unexpectedly, Skanska AB 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 Skanska AB will offset losses from the drop in Skanska AB's long position.The idea behind Securitas AB and Skanska 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.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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