Correlation Between Stratasys and Allegion PLC

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

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

Diversification Opportunities for Stratasys and Allegion PLC

-0.2

Correlation Coefficient

Stratasys  Allegion PLC

Good diversification

The 3 months correlation between Stratasys and Allegion is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Stratasys and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and Stratasys 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 Stratasys 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 Stratasys i.e., Stratasys and Allegion PLC go up and down completely randomly.

Pair Corralation between Stratasys and Allegion PLC

Given the investment horizon of 90 days Stratasys is expected to generate 2.53 times more return on investment than Allegion PLC. However, Stratasys is 2.53 times more volatile than Allegion PLC. It trades about 0.06 of its potential returns per unit of risk. Allegion PLC is currently generating about -0.03 per unit of risk. If you would invest  926.00  in Stratasys on December 23, 2024 and sell it today you would earn a total of  93.00  from holding Stratasys or generate 10.04% return on investment over 90 days.

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

Stratasys  vs.  Allegion PLC

Stratasys

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stratasys are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Stratasys unveiled solid returns over the last few months and may actually be approaching a breakup point.

Allegion PLC

Risk-Adjusted Performance

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 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 Stratasys and Allegion PLC

The main advantage of trading using opposite Stratasys and Allegion PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stratasys 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 Stratasys 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.