Correlation Between Thrivent High and Allegion PLC

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

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

Diversification Opportunities for Thrivent High and Allegion PLC

0.21

Correlation Coefficient

Thrivent High  Allegion PLC

Modest diversification

The 3 months correlation between Thrivent and Allegion is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent High Yield and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and Thrivent High 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 Thrivent High Yield 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 Thrivent High i.e., Thrivent High and Allegion PLC go up and down completely randomly.

Pair Corralation between Thrivent High and Allegion PLC

Assuming the 90 days horizon Thrivent High is expected to generate 2.41 times less return on investment than Allegion PLC. But when comparing it to its historical volatility, Thrivent High Yield is 6.87 times less risky than Allegion PLC. It trades about 0.15 of its potential returns per unit of risk. Allegion PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  13,654  in Allegion PLC on September 3, 2024 and sell it today you would earn a total of  430.00  from holding Allegion PLC or generate 3.15% return on investment over 90 days.

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

Thrivent High Yield  vs.  Allegion PLC

Thrivent High Yield

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent High Yield are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thrivent High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Allegion PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Allegion PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Thrivent High and Allegion PLC

The main advantage of trading using opposite Thrivent High and Allegion PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thrivent High 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 Thrivent High Yield 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.