Correlation Between Fidus Investment and Allegion PLC

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

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

Diversification Opportunities for Fidus Investment and Allegion PLC

-0.68

Correlation Coefficient

Fidus Investment  Allegion PLC

Excellent diversification

The 3 months correlation between Fidus and Allegion is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fidus Investment Corp and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and Fidus Investment 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 Fidus Investment Corp 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 Fidus Investment i.e., Fidus Investment and Allegion PLC go up and down completely randomly.

Pair Corralation between Fidus Investment and Allegion PLC

Given the investment horizon of 90 days Fidus Investment Corp is expected to generate 0.69 times more return on investment than Allegion PLC. However, Fidus Investment Corp is 1.45 times less risky than Allegion PLC. It trades about 0.39 of its potential returns per unit of risk. Allegion PLC is currently generating about -0.01 per unit of risk. If you would invest  2,090  in Fidus Investment Corp on October 26, 2024 and sell it today you would earn a total of  126.50  from holding Fidus Investment Corp or generate 6.05% return on investment over 90 days.

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

Fidus Investment Corp  vs.  Allegion PLC

Fidus Investment Corp

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Fidus Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Fidus Investment and Allegion PLC

The main advantage of trading using opposite Fidus Investment and Allegion PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidus Investment 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 Fidus Investment Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.