Correlation Between Allegion PLC and Logility Supply

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

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

Diversification Opportunities for Allegion PLC and Logility Supply

-0.42

Correlation Coefficient

Allegion PLC  Logility Supply

Very good diversification

The 3 months correlation between Allegion and Logility is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Logility Supply Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logility Supply Chain 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 Logility Supply. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logility Supply Chain has no effect on the direction of Allegion PLC i.e., Allegion PLC and Logility Supply go up and down completely randomly.

Pair Corralation between Allegion PLC and Logility Supply

Given the investment horizon of 90 days Allegion PLC is expected to under-perform the Logility Supply. But the stock apears to be less risky and, when comparing its historical volatility, Allegion PLC is 2.62 times less risky than Logility Supply. The stock trades about -0.47 of its potential returns per unit of risk. The Logility Supply Chain is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,133  in Logility Supply Chain on October 9, 2024 and sell it today you would lose (43.00) from holding Logility Supply Chain or give up 3.8% of portfolio value over 90 days.

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

Allegion PLC  vs.  Logility Supply Chain

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 weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Logility Supply Chain

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Logility Supply Chain are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Logility Supply may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Allegion PLC and Logility Supply

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

The idea behind Allegion PLC and Logility Supply Chain 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.