Correlation Between Pentair PLC and Baillie Gifford

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

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

Diversification Opportunities for Pentair PLC and Baillie Gifford

-0.78

Correlation Coefficient

Pentair PLC  Baillie Gifford

Pay attention - limited upside

The 3 months correlation between Pentair and Baillie is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Baillie Gifford European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford European 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 Baillie Gifford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baillie Gifford European has no effect on the direction of Pentair PLC i.e., Pentair PLC and Baillie Gifford go up and down completely randomly.

Pair Corralation between Pentair PLC and Baillie Gifford

Assuming the 90 days trading horizon Pentair PLC is expected to generate 0.95 times more return on investment than Baillie Gifford. However, Pentair PLC is 1.06 times less risky than Baillie Gifford. It trades about 0.29 of its potential returns per unit of risk. Baillie Gifford European is currently generating about -0.04 per unit of risk. If you would invest  9,195  in Pentair PLC on September 14, 2024 and sell it today you would earn a total of  1,615  from holding Pentair PLC or generate 17.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Pentair PLC  vs.  Baillie Gifford European

Pentair PLC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pentair PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Baillie Gifford European

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baillie Gifford European has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Baillie Gifford 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 Baillie Gifford

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

The idea behind Pentair PLC and Baillie Gifford European 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.