Correlation Between Pentair PLC and Axfood AB

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

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

Diversification Opportunities for Pentair PLC and Axfood AB

-0.62

Correlation Coefficient

Pentair PLC  Axfood AB

Excellent diversification

The 3 months correlation between Pentair and Axfood is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB 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 Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of Pentair PLC i.e., Pentair PLC and Axfood AB go up and down completely randomly.

Pair Corralation between Pentair PLC and Axfood AB

Assuming the 90 days trading horizon Pentair PLC is expected to under-perform the Axfood AB. In addition to that, Pentair PLC is 1.47 times more volatile than Axfood AB. It trades about -0.44 of its total potential returns per unit of risk. Axfood AB is currently generating about -0.06 per unit of volatility. If you would invest  23,475  in Axfood AB on October 12, 2024 and sell it today you would lose (215.00) from holding Axfood AB or give up 0.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Pentair PLC  vs.  Axfood AB

Pentair PLC

Risk-Adjusted Performance

0 of 100

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 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.

Axfood AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axfood AB 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 Axfood AB

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

The idea behind Pentair PLC and Axfood AB 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.