Correlation Between Pentair PLC and Batm Advanced

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

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

Diversification Opportunities for Pentair PLC and Batm Advanced

0.22

Correlation Coefficient

Pentair PLC  Batm Advanced

Modest diversification

The 3 months correlation between Pentair and Batm is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Batm Advanced Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Batm Advanced Commun 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 Batm Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Batm Advanced Commun has no effect on the direction of Pentair PLC i.e., Pentair PLC and Batm Advanced go up and down completely randomly.

Pair Corralation between Pentair PLC and Batm Advanced

Assuming the 90 days trading horizon Pentair PLC is expected to under-perform the Batm Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Pentair PLC is 1.79 times less risky than Batm Advanced. The stock trades about -0.21 of its potential returns per unit of risk. The Batm Advanced Communications is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,738  in Batm Advanced Communications on December 1, 2024 and sell it today you would lose (3.00) from holding Batm Advanced Communications or give up 0.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Pentair PLC  vs.  Batm Advanced Communications

Pentair PLC

Risk-Adjusted Performance

Very 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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Batm Advanced Commun

Risk-Adjusted Performance

Very Weak

Over the last 90 days Batm Advanced Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Batm Advanced is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pentair PLC and Batm Advanced

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

The idea behind Pentair PLC and Batm Advanced Communications 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.