Correlation Between Allegion PLC and BIO Key

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

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

Diversification Opportunities for Allegion PLC and BIO Key

0.32

Correlation Coefficient

Allegion PLC  BIO Key

Weak diversification

The 3 months correlation between Allegion and BIO is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and BIO Key International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIO Key International 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 BIO Key. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIO Key International has no effect on the direction of Allegion PLC i.e., Allegion PLC and BIO Key go up and down completely randomly.

Pair Corralation between Allegion PLC and BIO Key

Given the investment horizon of 90 days Allegion PLC is expected to generate 0.14 times more return on investment than BIO Key. However, Allegion PLC is 7.3 times less risky than BIO Key. It trades about 0.01 of its potential returns per unit of risk. BIO Key International is currently generating about -0.09 per unit of risk. If you would invest  13,044  in Allegion PLC on December 28, 2024 and sell it today you would lose (25.00) from holding Allegion PLC or give up 0.19% of portfolio value over 90 days.

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

Allegion PLC  vs.  BIO Key International

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.

BIO Key International

Risk-Adjusted Performance

Very Weak

Over the last 90 days BIO Key International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Allegion PLC and BIO Key

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

The idea behind Allegion PLC and BIO Key International 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.