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 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
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between MSA and Allegion is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding MSA Safety 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 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
Considering the 90-day investment horizon MSA Safety is expected to generate 5.84 times less return on investment than Allegion PLC. But when comparing it to its historical volatility, MSA Safety is 1.1 times less risky than Allegion PLC. It trades about 0.02 of its potential returns per unit of risk. Allegion PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 10,259 in Allegion PLC on August 24, 2024 and sell it today you would earn a total of 3,882 from holding Allegion PLC or generate 37.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MSA Safety 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. Allegion PLC | MSA Safety vs. Resideo Technologies | MSA Safety vs. NL Industries | MSA Safety vs. Brady |
| Allegion PLC vs. MSA Safety | Allegion PLC vs. Resideo Technologies | Allegion PLC vs. NL Industries | Allegion PLC vs. Brady |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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