Correlation Between Allegion PLC and Securitas

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

By analyzing existing cross correlation between Allegion PLC and Securitas AB, you can compare the effects of market volatilities on Allegion PLC 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 Allegion PLC with a short position of Securitas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegion PLC and Securitas.

Diversification Opportunities for Allegion PLC and Securitas

0.58

Correlation Coefficient

Allegion PLC  Securitas

Very weak diversification

The 3 months correlation between Allegion and Securitas is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Securitas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Securitas AB 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 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 AB has no effect on the direction of Allegion PLC i.e., Allegion PLC and Securitas go up and down completely randomly.

Pair Corralation between Allegion PLC and Securitas

Given the investment horizon of 90 days Allegion PLC is expected to generate 0.81 times more return on investment than Securitas. However, Allegion PLC is 1.23 times less risky than Securitas. It trades about -0.19 of its potential returns per unit of risk. Securitas AB is currently generating about -0.4 per unit of risk. If you would invest  13,291  in Allegion PLC on January 25, 2024 and sell it today you would lose (594.00) from holding Allegion PLC or give up 4.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Allegion PLC  vs.  Securitas AB

Allegion PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allegion PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Allegion PLC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Securitas AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Securitas AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Securitas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Allegion PLC and Securitas

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

The idea behind Allegion PLC and Securitas AB 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.