Correlation Between MSA Safety and Allegion Plc
Can any of the company-specific risk be diversified away by investing in both MSA Safety and Allegion Plc 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 MSA Safety and Allegion Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSA Safety Incorporated and Allegion plc, you can compare the effects of market volatilities on MSA Safety and Allegion Plc 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 MSA Safety with a short position of Allegion Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSA Safety and Allegion Plc.
Diversification Opportunities for MSA Safety and Allegion Plc
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MSA and Allegion is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding MSA Safety Incorporated and Allegion plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion plc and MSA Safety 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 MSA Safety Incorporated are associated (or correlated) with Allegion Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegion plc has no effect on the direction of MSA Safety i.e., MSA Safety and Allegion Plc go up and down completely randomly.
Pair Corralation between MSA Safety and Allegion Plc
Assuming the 90 days horizon MSA Safety Incorporated is expected to under-perform the Allegion Plc. In addition to that, MSA Safety is 1.07 times more volatile than Allegion plc. It trades about -0.14 of its total potential returns per unit of risk. Allegion plc is currently generating about -0.15 per unit of volatility. If you would invest 13,252 in Allegion plc on September 28, 2024 and sell it today you would lose (552.00) from holding Allegion plc or give up 4.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MSA Safety Incorporated vs. Allegion plc
Performance |
| Timeline |
| MSA Safety |
| Allegion plc |
MSA Safety and Allegion Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSA Safety and Allegion Plc
The main advantage of trading using opposite MSA Safety and Allegion Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSA Safety position performs unexpectedly, Allegion Plc 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 Allegion Plc will offset losses from the drop in Allegion Plc's long position.| MSA Safety vs. ABB PAR AB | MSA Safety vs. ASSA ABLOY AB | MSA Safety vs. SECOM LTD | MSA Safety vs. Halma plc |
| 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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