Correlation Between Allegion PLC and Old Republic

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

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

Diversification Opportunities for Allegion PLC and Old Republic

-0.33

Correlation Coefficient

Allegion PLC  Old Republic

Very good diversification

The 3 months correlation between Allegion and Old is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Old Republic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Republic Interna 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 Old Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Republic Interna has no effect on the direction of Allegion PLC i.e., Allegion PLC and Old Republic go up and down completely randomly.

Pair Corralation between Allegion PLC and Old Republic

Given the investment horizon of 90 days Allegion PLC is expected to generate 2.66 times less return on investment than Old Republic. In addition to that, Allegion PLC is 1.17 times more volatile than Old Republic International. It trades about 0.03 of its total potential returns per unit of risk. Old Republic International is currently generating about 0.1 per unit of volatility. If you would invest  1,978  in Old Republic International on October 11, 2024 and sell it today you would earn a total of  1,457  from holding Old Republic International or generate 73.66% return on investment over 90 days.

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

Allegion PLC  vs.  Old Republic International

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.

Old Republic Interna

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Old Republic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Allegion PLC and Old Republic

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

The idea behind Allegion PLC and Old Republic International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.