Correlation Between Allegion PLC and Somnigroup International

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

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

Diversification Opportunities for Allegion PLC and Somnigroup International

0.83

Correlation Coefficient

Allegion PLC  Somnigroup International

Very poor diversification

The 3 months correlation between Allegion and Somnigroup is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Somnigroup International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Somnigroup International and Allegion PLC 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 Allegion PLC are associated (or correlated) with Somnigroup International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Somnigroup International has no effect on the direction of Allegion PLC i.e., Allegion PLC and Somnigroup International go up and down completely randomly.

Pair Corralation between Allegion PLC and Somnigroup International

Given the investment horizon of 90 days Allegion PLC is expected to generate 0.9 times more return on investment than Somnigroup International. However, Allegion PLC is 1.11 times less risky than Somnigroup International. It trades about 0.19 of its potential returns per unit of risk. Somnigroup International is currently generating about 0.16 per unit of risk. If you would invest  14,037  in Allegion PLC on May 4, 2025 and sell it today you would earn a total of  2,476  from holding Allegion PLC or generate 17.64% return on investment over 90 days.

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

Allegion PLC  vs.  Somnigroup International

Allegion PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allegion PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Allegion PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Somnigroup International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Somnigroup International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Somnigroup International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allegion PLC and Somnigroup International

The main advantage of trading using opposite Allegion PLC and Somnigroup International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegion PLC position performs unexpectedly, Somnigroup International 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 Somnigroup International will offset losses from the drop in Somnigroup International's long position.

The idea behind Allegion PLC and Somnigroup International 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..