Correlation Between Pentair PLC and Amedeo Air

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

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

Diversification Opportunities for Pentair PLC and Amedeo Air

0.06

Correlation Coefficient

Pentair PLC  Amedeo Air

Significant diversification

The 3 months correlation between Pentair and Amedeo is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Amedeo Air Four in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedeo Air Four 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 Amedeo Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedeo Air Four has no effect on the direction of Pentair PLC i.e., Pentair PLC and Amedeo Air go up and down completely randomly.

Pair Corralation between Pentair PLC and Amedeo Air

Assuming the 90 days trading horizon Pentair PLC is expected to generate 2.4 times less return on investment than Amedeo Air. In addition to that, Pentair PLC is 1.21 times more volatile than Amedeo Air Four. It trades about 0.09 of its total potential returns per unit of risk. Amedeo Air Four is currently generating about 0.27 per unit of volatility. If you would invest  4,948  in Amedeo Air Four on October 23, 2024 and sell it today you would earn a total of  832.00  from holding Amedeo Air Four or generate 16.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Pentair PLC  vs.  Amedeo Air Four

Pentair PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pentair PLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Amedeo Air Four

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amedeo Air Four are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Amedeo Air exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair PLC and Amedeo Air

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

The idea behind Pentair PLC and Amedeo Air Four 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 Transaction History module to view history of all your transactions and understand their impact on performance.