Correlation Between Allegion PLC and Medicus Pharma

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

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

Diversification Opportunities for Allegion PLC and Medicus Pharma

-0.04

Correlation Coefficient

Allegion PLC  Medicus Pharma

Good diversification

The 3 months correlation between Allegion and Medicus is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Medicus Pharma Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicus Pharma 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 Medicus Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicus Pharma has no effect on the direction of Allegion PLC i.e., Allegion PLC and Medicus Pharma go up and down completely randomly.

Pair Corralation between Allegion PLC and Medicus Pharma

Given the investment horizon of 90 days Allegion PLC is expected to generate 76.41 times less return on investment than Medicus Pharma. But when comparing it to its historical volatility, Allegion PLC is 19.62 times less risky than Medicus Pharma. It trades about 0.03 of its potential returns per unit of risk. Medicus Pharma Ltd is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  177.00  in Medicus Pharma Ltd on October 9, 2024 and sell it today you would earn a total of  122.00  from holding Medicus Pharma Ltd or generate 68.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.08%
Values	Daily Returns

Allegion PLC  vs.  Medicus Pharma Ltd

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.

Medicus Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicus Pharma Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Allegion PLC and Medicus Pharma

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

The idea behind Allegion PLC and Medicus Pharma Ltd 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.