Correlation Between Pentair PLC and CAP LEASE

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Can any of the company-specific risk be diversified away by investing in both Pentair PLC and CAP LEASE 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 CAP LEASE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and CAP LEASE AVIATION, you can compare the effects of market volatilities on Pentair PLC and CAP LEASE 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 CAP LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and CAP LEASE.

Diversification Opportunities for Pentair PLC and CAP LEASE

-0.79
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Pentair and CAP is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and CAP LEASE AVIATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAP LEASE AVIATION 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 CAP LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAP LEASE AVIATION has no effect on the direction of Pentair PLC i.e., Pentair PLC and CAP LEASE go up and down completely randomly.

Pair Corralation between Pentair PLC and CAP LEASE

Assuming the 90 days trading horizon Pentair PLC is expected to generate 0.76 times more return on investment than CAP LEASE. However, Pentair PLC is 1.32 times less risky than CAP LEASE. It trades about 0.15 of its potential returns per unit of risk. CAP LEASE AVIATION is currently generating about -0.11 per unit of risk. If you would invest  7,511  in Pentair PLC on October 4, 2024 and sell it today you would earn a total of  2,563  from holding Pentair PLC or generate 34.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy97.6%
ValuesDaily Returns

Pentair PLC  vs.  CAP LEASE AVIATION

 Performance 
       Timeline  
Pentair PLC 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
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 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.
CAP LEASE AVIATION 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CAP LEASE AVIATION 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pentair PLC and CAP LEASE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pentair PLC and CAP LEASE

The main advantage of trading using opposite Pentair PLC and CAP LEASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, CAP LEASE 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 CAP LEASE will offset losses from the drop in CAP LEASE's long position.
The idea behind Pentair PLC and CAP LEASE AVIATION 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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