Correlation Between American Century and Allegion PLC

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

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

Diversification Opportunities for American Century and Allegion PLC

0.39

Correlation Coefficient

American Century  Allegion PLC

Weak diversification

The 3 months correlation between American and Allegion is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Century One and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and American Century 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 American Century One 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 American Century i.e., American Century and Allegion PLC go up and down completely randomly.

Pair Corralation between American Century and Allegion PLC

Assuming the 90 days horizon American Century One is expected to under-perform the Allegion PLC. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Century One is 1.83 times less risky than Allegion PLC. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Allegion PLC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  13,044  in Allegion PLC on December 30, 2024 and sell it today you would lose (215.00) from holding Allegion PLC or give up 1.65% of portfolio value over 90 days.

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

American Century One  vs.  Allegion PLC

American Century One

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Century One has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Allegion PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allegion PLC has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with American Century and Allegion PLC

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

The idea behind American Century One and Allegion PLC 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.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.