Correlation Between Pentair PLC and RS GROUP

Can any of the company-specific risk be diversified away by investing in both Pentair PLC and RS 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 RS 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 RS GROUP PLC, you can compare the effects of market volatilities on Pentair PLC and RS 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 RS GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and RS GROUP.

Diversification Opportunities for Pentair PLC and RS GROUP

-0.64

Correlation Coefficient

Pentair PLC  RS GROUP

Excellent diversification

The 3 months correlation between Pentair and RS1 is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and RS GROUP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RS 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 RS GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RS GROUP PLC has no effect on the direction of Pentair PLC i.e., Pentair PLC and RS GROUP go up and down completely randomly.

Pair Corralation between Pentair PLC and RS GROUP

Assuming the 90 days trading horizon Pentair PLC is expected to generate 0.38 times more return on investment than RS GROUP. However, Pentair PLC is 2.63 times less risky than RS GROUP. It trades about 0.24 of its potential returns per unit of risk. RS GROUP PLC is currently generating about -0.07 per unit of risk. If you would invest  9,373  in Pentair PLC on September 17, 2024 and sell it today you would earn a total of  1,315  from holding Pentair PLC or generate 14.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Pentair PLC  vs.  RS GROUP PLC

Pentair PLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 18 (%) 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.

RS GROUP PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RS GROUP PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Pentair PLC and RS GROUP

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

The idea behind Pentair PLC and RS 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.