Correlation Between Service International and Allegion PLC

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

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

Diversification Opportunities for Service International and Allegion PLC

0.4

Correlation Coefficient

Service International  Allegion PLC

Very weak diversification

The 3 months correlation between Service and Allegion is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Service International and Allegion PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegion PLC and Service International 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 Service International 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 Service International i.e., Service International and Allegion PLC go up and down completely randomly.

Pair Corralation between Service International and Allegion PLC

Considering the 90-day investment horizon Service International is expected to under-perform the Allegion PLC. But the stock apears to be less risky and, when comparing its historical volatility, Service International is 1.05 times less risky than Allegion PLC. The stock trades about -0.02 of its potential returns per unit of risk. The Allegion PLC is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  13,599  in Allegion PLC on April 25, 2025 and sell it today you would earn a total of  1,837  from holding Allegion PLC or generate 13.51% return on investment over 90 days.

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

Service International  vs.  Allegion PLC

Service International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Service International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Service International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Allegion PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allegion PLC are ranked lower than 13 (%) 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 Service International and Allegion PLC

The main advantage of trading using opposite Service International and Allegion PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Service International 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 Service International 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.