Correlation Between Allegion PLC and Brinks

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

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

Diversification Opportunities for Allegion PLC and Brinks

0.72

Correlation Coefficient

Allegion PLC  Brinks

Poor diversification

The 3 months correlation between Allegion and Brinks is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Brinks Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks Company 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 Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks Company has no effect on the direction of Allegion PLC i.e., Allegion PLC and Brinks go up and down completely randomly.

Pair Corralation between Allegion PLC and Brinks

Given the investment horizon of 90 days Allegion PLC is expected to under-perform the Brinks. In addition to that, Allegion PLC is 1.2 times more volatile than Brinks Company. It trades about -0.04 of its total potential returns per unit of risk. Brinks Company is currently generating about -0.02 per unit of volatility. If you would invest  9,410  in Brinks Company on November 19, 2024 and sell it today you would lose (49.00) from holding Brinks Company or give up 0.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Allegion PLC  vs.  Brinks Company

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.

Brinks Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brinks Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Brinks is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Allegion PLC and Brinks

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

The idea behind Allegion PLC and Brinks Company 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.