Correlation Between Pentair PLC and American Express

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

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

Diversification Opportunities for Pentair PLC and American Express

0.73

Correlation Coefficient

Pentair PLC  American Express

Poor diversification

The 3 months correlation between Pentair and American is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Pentair PLC i.e., Pentair PLC and American Express go up and down completely randomly.

Pair Corralation between Pentair PLC and American Express

Assuming the 90 days trading horizon Pentair PLC is expected to generate 1.13 times more return on investment than American Express. However, Pentair PLC is 1.13 times more volatile than American Express Co. It trades about 0.09 of its potential returns per unit of risk. American Express Co is currently generating about 0.09 per unit of risk. If you would invest  5,050  in Pentair PLC on October 5, 2024 and sell it today you would earn a total of  5,035  from holding Pentair PLC or generate 99.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.33%
Values	Daily Returns

Pentair PLC  vs.  American Express Co

Pentair PLC

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 6 (%) 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.

American Express

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Express Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pentair PLC and American Express

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

The idea behind Pentair PLC and American Express Co 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.