Correlation Between Allegion PLC and Braskem SA
Can any of the company-specific risk be diversified away by investing in both Allegion PLC and Braskem SA 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 Braskem SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allegion PLC and Braskem SA Class, you can compare the effects of market volatilities on Allegion PLC and Braskem SA 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 Braskem SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegion PLC and Braskem SA.
Diversification Opportunities for Allegion PLC and Braskem SA
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allegion and Braskem is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Braskem SA Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braskem SA Class 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 Braskem SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braskem SA Class has no effect on the direction of Allegion PLC i.e., Allegion PLC and Braskem SA go up and down completely randomly.
Pair Corralation between Allegion PLC and Braskem SA
Given the investment horizon of 90 days Allegion PLC is expected to generate 0.43 times more return on investment than Braskem SA. However, Allegion PLC is 2.3 times less risky than Braskem SA. It trades about 0.03 of its potential returns per unit of risk. Braskem SA Class is currently generating about -0.01 per unit of risk. If you would invest 11,193 in Allegion PLC on November 9, 2024 and sell it today you would earn a total of 1,737 from holding Allegion PLC or generate 15.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allegion PLC vs. Braskem SA Class
Performance |
| Timeline |
| Allegion PLC |
| Braskem SA Class |
Allegion PLC and Braskem SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allegion PLC and Braskem SA
The main advantage of trading using opposite Allegion PLC and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegion PLC position performs unexpectedly, Braskem SA 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 Braskem SA will offset losses from the drop in Braskem SA's long position.| Allegion PLC vs. MSA Safety | Allegion PLC vs. Resideo Technologies | Allegion PLC vs. NL Industries | Allegion PLC vs. Brady |
| Braskem SA vs. Valhi Inc | Braskem SA vs. Huntsman | Braskem SA vs. Lsb Industries | Braskem SA vs. Westlake Chemical Partners |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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