Correlation Between AG Mortgage and Allegion PLC

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

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

Diversification Opportunities for AG Mortgage and Allegion PLC

-0.68

Correlation Coefficient

AG Mortgage  Allegion PLC

Excellent diversification

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

Pair Corralation between AG Mortgage and Allegion PLC

Given the investment horizon of 90 days AG Mortgage is expected to generate 1.05 times less return on investment than Allegion PLC. But when comparing it to its historical volatility, AG Mortgage Investment is 4.95 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 0.03 of returns per unit of risk over similar time horizon. If you would invest  10,832  in Allegion PLC on October 11, 2024 and sell it today you would earn a total of  2,008  from holding Allegion PLC or generate 18.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	32.66%
Values	Daily Returns

AG Mortgage Investment  vs.  Allegion PLC

AG Mortgage Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, AG Mortgage is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with AG Mortgage and Allegion PLC

The main advantage of trading using opposite AG Mortgage and Allegion PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AG Mortgage 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 AG Mortgage Investment 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.