Correlation Between Allegion PLC and Bridger Aerospace

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

By analyzing existing cross correlation between Allegion PLC and Bridger Aerospace Group, you can compare the effects of market volatilities on Allegion PLC and Bridger Aerospace 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 Bridger Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegion PLC and Bridger Aerospace.

Diversification Opportunities for Allegion PLC and Bridger Aerospace

0.03

Correlation Coefficient

Allegion PLC  Bridger Aerospace

Significant diversification

The 3 months correlation between Allegion and Bridger is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Bridger Aerospace Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridger Aerospace 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 Bridger Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridger Aerospace has no effect on the direction of Allegion PLC i.e., Allegion PLC and Bridger Aerospace go up and down completely randomly.

Pair Corralation between Allegion PLC and Bridger Aerospace

Given the investment horizon of 90 days Allegion PLC is expected to generate 26.1 times less return on investment than Bridger Aerospace. But when comparing it to its historical volatility, Allegion PLC is 16.53 times less risky than Bridger Aerospace. It trades about 0.04 of its potential returns per unit of risk. Bridger Aerospace Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Bridger Aerospace Group on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Bridger Aerospace Group or generate 0.0% return on investment over 90 days.

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

Allegion PLC  vs.  Bridger Aerospace Group

Allegion PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Allegion PLC are ranked lower than 5 (%) 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.

Bridger Aerospace

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bridger Aerospace Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Bridger Aerospace showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allegion PLC and Bridger Aerospace

The main advantage of trading using opposite Allegion PLC and Bridger Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegion PLC position performs unexpectedly, Bridger Aerospace 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 Bridger Aerospace will offset losses from the drop in Bridger Aerospace's long position.

The idea behind Allegion PLC and Bridger Aerospace Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.