Correlation Between Volkswagen and Pentair PLC

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

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

Diversification Opportunities for Volkswagen and Pentair PLC

-0.69

Correlation Coefficient

Volkswagen  Pentair PLC

Excellent diversification

The 3 months correlation between Volkswagen and Pentair is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Non Vtg and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Volkswagen 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 Volkswagen AG Non Vtg are associated (or correlated) with Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Volkswagen i.e., Volkswagen and Pentair PLC go up and down completely randomly.

Pair Corralation between Volkswagen and Pentair PLC

Assuming the 90 days trading horizon Volkswagen AG Non Vtg is expected to generate 1.68 times more return on investment than Pentair PLC. However, Volkswagen is 1.68 times more volatile than Pentair PLC. It trades about 0.12 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.17 per unit of risk. If you would invest  8,845  in Volkswagen AG Non Vtg on December 26, 2024 and sell it today you would earn a total of  1,380  from holding Volkswagen AG Non Vtg or generate 15.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

Volkswagen AG Non Vtg  vs.  Pentair PLC

Volkswagen AG Non

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG Non Vtg are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Volkswagen unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pentair PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pentair PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Volkswagen and Pentair PLC

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

The idea behind Volkswagen AG Non Vtg and Pentair 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.