Correlation Between AUTO TRADER and SECURITAS

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

By analyzing existing cross correlation between AUTO TRADER ADR and SECURITAS B , you can compare the effects of market volatilities on AUTO TRADER 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 AUTO TRADER with a short position of SECURITAS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTO TRADER and SECURITAS.

Diversification Opportunities for AUTO TRADER and SECURITAS

0.11

Correlation Coefficient

AUTO TRADER  SECURITAS

Average diversification

The 3 months correlation between AUTO and SECURITAS is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding AUTO TRADER ADR and SECURITAS B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECURITAS B and AUTO TRADER 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 AUTO TRADER ADR 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 B has no effect on the direction of AUTO TRADER i.e., AUTO TRADER and SECURITAS go up and down completely randomly.

Pair Corralation between AUTO TRADER and SECURITAS

Assuming the 90 days trading horizon AUTO TRADER ADR is expected to generate 0.85 times more return on investment than SECURITAS. However, AUTO TRADER ADR is 1.18 times less risky than SECURITAS. It trades about 0.03 of its potential returns per unit of risk. SECURITAS B is currently generating about 0.0 per unit of risk. If you would invest  216.00  in AUTO TRADER ADR on April 24, 2025 and sell it today you would earn a total of  6.00  from holding AUTO TRADER ADR or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

AUTO TRADER ADR  vs.  SECURITAS B

AUTO TRADER ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AUTO TRADER ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AUTO TRADER is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SECURITAS B

Risk-Adjusted Performance

Very Weak

Over the last 90 days SECURITAS B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SECURITAS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AUTO TRADER and SECURITAS

The main advantage of trading using opposite AUTO TRADER and SECURITAS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUTO TRADER 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's long position.

The idea behind AUTO TRADER ADR and SECURITAS B 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.