Correlation Between MarketAxess Holdings and Allegion PLC

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

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

Diversification Opportunities for MarketAxess Holdings and Allegion PLC

0.85

Correlation Coefficient

MarketAxess Holdings  Allegion PLC

Very poor diversification

The 3 months correlation between MarketAxess and Allegion is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding MarketAxess Holdings and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and MarketAxess Holdings 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 MarketAxess Holdings 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 MarketAxess Holdings i.e., MarketAxess Holdings and Allegion PLC go up and down completely randomly.

Pair Corralation between MarketAxess Holdings and Allegion PLC

Given the investment horizon of 90 days MarketAxess Holdings is expected to under-perform the Allegion PLC. In addition to that, MarketAxess Holdings is 1.48 times more volatile than Allegion PLC. It trades about -0.04 of its total potential returns per unit of risk. Allegion PLC is currently generating about 0.03 per unit of volatility. If you would invest  11,684  in Allegion PLC on October 23, 2024 and sell it today you would earn a total of  1,675  from holding Allegion PLC or generate 14.34% return on investment over 90 days.

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

MarketAxess Holdings  vs.  Allegion PLC

MarketAxess Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MarketAxess Holdings 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company 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 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 MarketAxess Holdings and Allegion PLC

The main advantage of trading using opposite MarketAxess Holdings and Allegion PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MarketAxess Holdings 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 MarketAxess Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.