Correlation Between Bright Horizons and Allegion PLC

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

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

Diversification Opportunities for Bright Horizons and Allegion PLC

-0.71

Correlation Coefficient

Bright Horizons  Allegion PLC

Pay attention - limited upside

The 3 months correlation between Bright and Allegion is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bright Horizons Family and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and Bright Horizons 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 Bright Horizons Family 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 Bright Horizons i.e., Bright Horizons and Allegion PLC go up and down completely randomly.

Pair Corralation between Bright Horizons and Allegion PLC

Given the investment horizon of 90 days Bright Horizons Family is expected to under-perform the Allegion PLC. In addition to that, Bright Horizons is 1.28 times more volatile than Allegion PLC. It trades about 0.0 of its total potential returns per unit of risk. Allegion PLC is currently generating about 0.18 per unit of volatility. If you would invest  14,037  in Allegion PLC on May 5, 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bright Horizons Family  vs.  Allegion PLC

Bright Horizons Family

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bright Horizons Family has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Bright Horizons is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Bright Horizons and Allegion PLC

The main advantage of trading using opposite Bright Horizons and Allegion PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Horizons 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 Bright Horizons Family 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 CEOs Directory module to screen CEOs from public companies around the world.