Correlation Between Entegris and Allegion PLC

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

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

Diversification Opportunities for Entegris and Allegion PLC

0.44

Correlation Coefficient

Entegris  Allegion PLC

Very weak diversification

The 3 months correlation between Entegris and Allegion is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Entegris and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and Entegris 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 Entegris are associated (or correlated) with Allegion PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegion PLC has no effect on the direction of Entegris i.e., Entegris and Allegion PLC go up and down completely randomly.

Pair Corralation between Entegris and Allegion PLC

Given the investment horizon of 90 days Entegris is expected to generate 1.4 times more return on investment than Allegion PLC. However, Entegris is 1.4 times more volatile than Allegion PLC. It trades about 0.1 of its potential returns per unit of risk. Allegion PLC is currently generating about -0.01 per unit of risk. If you would invest  10,223  in Entegris on October 26, 2024 and sell it today you would earn a total of  303.00  from holding Entegris or generate 2.96% return on investment over 90 days.

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

Entegris  vs.  Allegion PLC

Entegris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entegris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Entegris is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Entegris and Allegion PLC

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

The idea behind Entegris and Allegion PLC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.