Correlation Between Allegion PLC and Geo

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

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

Diversification Opportunities for Allegion PLC and Geo

-0.63

Correlation Coefficient

Allegion PLC  Geo

Excellent diversification

The 3 months correlation between Allegion and Geo is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Geo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo 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 Geo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geo Group has no effect on the direction of Allegion PLC i.e., Allegion PLC and Geo go up and down completely randomly.

Pair Corralation between Allegion PLC and Geo

Given the investment horizon of 90 days Allegion PLC is expected to generate 4.61 times less return on investment than Geo. But when comparing it to its historical volatility, Allegion PLC is 2.72 times less risky than Geo. It trades about 0.07 of its potential returns per unit of risk. Geo Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  860.00  in Geo Group on September 26, 2024 and sell it today you would earn a total of  1,941  from holding Geo Group or generate 225.7% 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.  Geo 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.

Geo Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geo Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Geo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allegion PLC and Geo

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

The idea behind Allegion PLC and Geo 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.