Correlation Between Allegion PLC and Vishay Intertechnology

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

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

Diversification Opportunities for Allegion PLC and Vishay Intertechnology

0.35

Correlation Coefficient

Allegion PLC  Vishay Intertechnology

Weak diversification

The 3 months correlation between Allegion and Vishay is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Vishay Intertechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Intertechnology 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 Vishay Intertechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vishay Intertechnology has no effect on the direction of Allegion PLC i.e., Allegion PLC and Vishay Intertechnology go up and down completely randomly.

Pair Corralation between Allegion PLC and Vishay Intertechnology

Given the investment horizon of 90 days Allegion PLC is expected to generate 0.71 times more return on investment than Vishay Intertechnology. However, Allegion PLC is 1.4 times less risky than Vishay Intertechnology. It trades about 0.02 of its potential returns per unit of risk. Vishay Intertechnology is currently generating about -0.02 per unit of risk. If you would invest  11,964  in Allegion PLC on October 25, 2024 and sell it today you would earn a total of  1,543  from holding Allegion PLC or generate 12.9% return on investment over 90 days.

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

Allegion PLC  vs.  Vishay Intertechnology

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 rather sound essential indicators, Allegion PLC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Vishay Intertechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vishay Intertechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vishay Intertechnology is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Allegion PLC and Vishay Intertechnology

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

The idea behind Allegion PLC and Vishay Intertechnology 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .