Correlation Between Pentair PLC and Ion Beam

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

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

Diversification Opportunities for Pentair PLC and Ion Beam

-0.17

Correlation Coefficient

Pentair PLC  Ion Beam

Good diversification

The 3 months correlation between Pentair and Ion is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Ion Beam Applications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ion Beam Applications and Pentair PLC 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 Pentair PLC are associated (or correlated) with Ion Beam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ion Beam Applications has no effect on the direction of Pentair PLC i.e., Pentair PLC and Ion Beam go up and down completely randomly.

Pair Corralation between Pentair PLC and Ion Beam

Assuming the 90 days trading horizon Pentair PLC is expected to generate 0.63 times more return on investment than Ion Beam. However, Pentair PLC is 1.6 times less risky than Ion Beam. It trades about 0.16 of its potential returns per unit of risk. Ion Beam Applications is currently generating about 0.04 per unit of risk. If you would invest  7,472  in Pentair PLC on September 29, 2024 and sell it today you would earn a total of  2,658  from holding Pentair PLC or generate 35.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.85%
Values	Daily Returns

Pentair PLC  vs.  Ion Beam Applications

Pentair PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pentair PLC is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ion Beam Applications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ion Beam Applications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ion Beam is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pentair PLC and Ion Beam

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

The idea behind Pentair PLC and Ion Beam Applications 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.