Correlation Between Insteel Industries and Allegion PLC

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

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

Diversification Opportunities for Insteel Industries and Allegion PLC

0.31

Correlation Coefficient

Insteel Industries  Allegion PLC

Weak diversification

The 3 months correlation between Insteel and Allegion is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Insteel Industries and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and Insteel Industries 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 Insteel Industries 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 Insteel Industries i.e., Insteel Industries and Allegion PLC go up and down completely randomly.

Pair Corralation between Insteel Industries and Allegion PLC

Given the investment horizon of 90 days Insteel Industries is expected to generate 4.42 times less return on investment than Allegion PLC. In addition to that, Insteel Industries is 1.21 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 0.2 per unit of volatility. If you would invest  13,971  in Allegion PLC on May 7, 2025 and sell it today you would earn a total of  2,702  from holding Allegion PLC or generate 19.34% return on investment over 90 days.

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

Insteel Industries  vs.  Allegion PLC

Insteel Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Insteel Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Insteel Industries is not utilizing all of its potentials. The current 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 15 (%) 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 Insteel Industries and Allegion PLC

The main advantage of trading using opposite Insteel Industries and Allegion PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insteel Industries 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 Insteel Industries 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.