Correlation Between Universal Stainless and Allegion PLC

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Can any of the company-specific risk be diversified away by investing in both Universal Stainless 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 Universal Stainless and Allegion PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Stainless Alloy and Allegion PLC, you can compare the effects of market volatilities on Universal Stainless 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 Universal Stainless with a short position of Allegion PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Stainless and Allegion PLC.

Diversification Opportunities for Universal Stainless and Allegion PLC

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Universal and Allegion is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and Universal Stainless 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 Universal Stainless Alloy 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 Universal Stainless i.e., Universal Stainless and Allegion PLC go up and down completely randomly.

Pair Corralation between Universal Stainless and Allegion PLC

Given the investment horizon of 90 days Universal Stainless Alloy is expected to generate 2.72 times more return on investment than Allegion PLC. However, Universal Stainless is 2.72 times more volatile than Allegion PLC. It trades about 0.12 of its potential returns per unit of risk. Allegion PLC is currently generating about 0.0 per unit of risk. If you would invest  1,974  in Universal Stainless Alloy on October 7, 2024 and sell it today you would earn a total of  2,411  from holding Universal Stainless Alloy or generate 122.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Universal Stainless Alloy  vs.  Allegion PLC

 Performance 
       Timeline  
Universal Stainless Alloy 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Universal Stainless may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Allegion PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

Universal Stainless and Allegion PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Universal Stainless and Allegion PLC

The main advantage of trading using opposite Universal Stainless and Allegion PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Stainless 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 Universal Stainless Alloy 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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