Correlation Between ChampionX and ALLEGION

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

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

Diversification Opportunities for ChampionX and ALLEGION

0.67

Correlation Coefficient

ChampionX  ALLEGION

Poor diversification

The 3 months correlation between ChampionX and ALLEGION is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ChampionX and ALLEGION HLDG INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLEGION HLDG INC and ChampionX 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 ChampionX are associated (or correlated) with ALLEGION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLEGION HLDG INC has no effect on the direction of ChampionX i.e., ChampionX and ALLEGION go up and down completely randomly.

Pair Corralation between ChampionX and ALLEGION

Considering the 90-day investment horizon ChampionX is expected to under-perform the ALLEGION. In addition to that, ChampionX is 3.95 times more volatile than ALLEGION HLDG INC. It trades about -0.38 of its total potential returns per unit of risk. ALLEGION HLDG INC is currently generating about -0.08 per unit of volatility. If you would invest  9,610  in ALLEGION HLDG INC on September 27, 2024 and sell it today you would lose (62.00) from holding ALLEGION HLDG INC or give up 0.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

ChampionX  vs.  ALLEGION HLDG INC

ChampionX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChampionX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ALLEGION HLDG INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALLEGION HLDG INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALLEGION is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ChampionX and ALLEGION

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

The idea behind ChampionX and ALLEGION HLDG INC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.