Correlation Between Allegion PLC and CME

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

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

Diversification Opportunities for Allegion PLC and CME

-0.64

Correlation Coefficient

Allegion PLC  CME

Excellent diversification

The 3 months correlation between Allegion and CME is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group 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 CME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CME Group has no effect on the direction of Allegion PLC i.e., Allegion PLC and CME go up and down completely randomly.

Pair Corralation between Allegion PLC and CME

Given the investment horizon of 90 days Allegion PLC is expected to under-perform the CME. In addition to that, Allegion PLC is 1.44 times more volatile than CME Group. It trades about -0.44 of its total potential returns per unit of risk. CME Group is currently generating about 0.05 per unit of volatility. If you would invest  23,098  in CME Group on October 8, 2024 and sell it today you would earn a total of  152.00  from holding CME Group or generate 0.66% return on investment over 90 days.

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

Allegion PLC  vs.  CME Group

Allegion PLC

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

CME Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, CME may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Allegion PLC and CME

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

The idea behind Allegion PLC and CME 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.