Correlation Between Pentair PLC and Westlake Chemical

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

By analyzing existing cross correlation between Pentair PLC and Westlake Chemical Corp, you can compare the effects of market volatilities on Pentair PLC and Westlake Chemical 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 Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and Westlake Chemical.

Diversification Opportunities for Pentair PLC and Westlake Chemical

-0.57

Correlation Coefficient

Pentair PLC  Westlake Chemical

Excellent diversification

The 3 months correlation between Pentair and Westlake is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Westlake Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical Corp 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 Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical Corp has no effect on the direction of Pentair PLC i.e., Pentair PLC and Westlake Chemical go up and down completely randomly.

Pair Corralation between Pentair PLC and Westlake Chemical

Assuming the 90 days trading horizon Pentair PLC is expected to generate 0.9 times more return on investment than Westlake Chemical. However, Pentair PLC is 1.11 times less risky than Westlake Chemical. It trades about 0.07 of its potential returns per unit of risk. Westlake Chemical Corp is currently generating about -0.08 per unit of risk. If you would invest  8,213  in Pentair PLC on October 8, 2024 and sell it today you would earn a total of  1,739  from holding Pentair PLC or generate 21.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.45%
Values	Daily Returns

Pentair PLC  vs.  Westlake Chemical Corp

Pentair PLC

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 3 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Westlake Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westlake Chemical Corp 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Pentair PLC and Westlake Chemical

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

The idea behind Pentair PLC and Westlake Chemical Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.