Correlation Between Allegion PLC and EastGroup Properties

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

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

Diversification Opportunities for Allegion PLC and EastGroup Properties

0.94

Correlation Coefficient

Allegion PLC  EastGroup Properties

Almost no diversification

The 3 months correlation between Allegion and EastGroup is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and EastGroup Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EastGroup Properties 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 EastGroup Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EastGroup Properties has no effect on the direction of Allegion PLC i.e., Allegion PLC and EastGroup Properties go up and down completely randomly.

Pair Corralation between Allegion PLC and EastGroup Properties

Given the investment horizon of 90 days Allegion PLC is expected to under-perform the EastGroup Properties. But the stock apears to be less risky and, when comparing its historical volatility, Allegion PLC is 1.22 times less risky than EastGroup Properties. The stock trades about -0.17 of its potential returns per unit of risk. The EastGroup Properties is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  17,642  in EastGroup Properties on October 7, 2024 and sell it today you would lose (1,547) from holding EastGroup Properties or give up 8.77% of portfolio value over 90 days.

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

Allegion PLC  vs.  EastGroup Properties

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.

EastGroup Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EastGroup Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Allegion PLC and EastGroup Properties

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

The idea behind Allegion PLC and EastGroup Properties 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.