Correlation Between Palmer Square and ALLEGION

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

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

Diversification Opportunities for Palmer Square and ALLEGION

-0.64

Correlation Coefficient

Palmer Square  ALLEGION

Excellent diversification

The 3 months correlation between Palmer and ALLEGION is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Palmer Square Ultra Short 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 Palmer Square 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 Palmer Square Ultra Short 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 Palmer Square i.e., Palmer Square and ALLEGION go up and down completely randomly.

Pair Corralation between Palmer Square and ALLEGION

Assuming the 90 days horizon Palmer Square Ultra Short is expected to generate 0.07 times more return on investment than ALLEGION. However, Palmer Square Ultra Short is 14.12 times less risky than ALLEGION. It trades about 0.58 of its potential returns per unit of risk. ALLEGION HLDG INC is currently generating about -0.08 per unit of risk. If you would invest  2,005  in Palmer Square Ultra Short on September 27, 2024 and sell it today you would earn a total of  7.00  from holding Palmer Square Ultra Short or generate 0.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Palmer Square Ultra Short  vs.  ALLEGION HLDG INC

Palmer Square Ultra

Risk-Adjusted Performance

57 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Ultra Short are ranked lower than 57 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 Palmer Square and ALLEGION

The main advantage of trading using opposite Palmer Square and ALLEGION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palmer Square 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 Palmer Square Ultra Short 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.