Correlation Between Pentair PLC and Mitie Group

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

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

Diversification Opportunities for Pentair PLC and Mitie Group

-0.8

Correlation Coefficient

Pentair PLC  Mitie Group

Pay attention - limited upside

The 3 months correlation between Pentair and Mitie is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC 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 Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Pentair PLC i.e., Pentair PLC and Mitie Group go up and down completely randomly.

Pair Corralation between Pentair PLC and Mitie Group

Assuming the 90 days trading horizon Pentair PLC is expected to under-perform the Mitie Group. In addition to that, Pentair PLC is 1.26 times more volatile than Mitie Group PLC. It trades about -0.35 of its total potential returns per unit of risk. Mitie Group PLC is currently generating about 0.1 per unit of volatility. If you would invest  10,792  in Mitie Group PLC on October 10, 2024 and sell it today you would earn a total of  188.00  from holding Mitie Group PLC or generate 1.74% return on investment over 90 days.

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

Pentair PLC  vs.  Mitie Group PLC

Pentair PLC

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 3 (%) 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.

Mitie Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pentair PLC and Mitie Group

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

The idea behind Pentair PLC and Mitie Group PLC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.