Correlation Between Allegion Plc and SECOM CO
Can any of the company-specific risk be diversified away by investing in both Allegion Plc 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 Allegion Plc and SECOM CO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allegion plc and SECOM LTD, you can compare the effects of market volatilities on Allegion Plc 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 Allegion Plc with a short position of SECOM CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegion Plc and SECOM CO.
Diversification Opportunities for Allegion Plc and SECOM CO
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Allegion and SECOM is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Allegion plc and SECOM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECOM LTD and Allegion Plc 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 Allegion plc 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 Allegion Plc i.e., Allegion Plc and SECOM CO go up and down completely randomly.
Pair Corralation between Allegion Plc and SECOM CO
Assuming the 90 days horizon Allegion plc is expected to under-perform the SECOM CO. In addition to that, Allegion Plc is 1.38 times more volatile than SECOM LTD. It trades about -0.15 of its total potential returns per unit of risk. SECOM LTD is currently generating about 0.16 per unit of volatility. If you would invest 3,180 in SECOM LTD on September 28, 2024 and sell it today you would earn a total of 100.00 from holding SECOM LTD or generate 3.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allegion plc vs. SECOM LTD
Performance |
| Timeline |
| Allegion plc |
| SECOM LTD |
Allegion Plc and SECOM CO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allegion Plc and SECOM CO
The main advantage of trading using opposite Allegion Plc and SECOM CO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegion Plc 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.| Allegion Plc vs. ABB PAR AB | Allegion Plc vs. ASSA ABLOY AB | Allegion Plc vs. SECOM LTD | Allegion Plc vs. Halma plc |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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