Correlation Between Pentair PLC and Seed Innovations

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

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

Diversification Opportunities for Pentair PLC and Seed Innovations

0.03

Correlation Coefficient

Pentair PLC  Seed Innovations

Significant diversification

The 3 months correlation between Pentair and Seed is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Seed Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seed Innovations 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 Seed Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seed Innovations has no effect on the direction of Pentair PLC i.e., Pentair PLC and Seed Innovations go up and down completely randomly.

Pair Corralation between Pentair PLC and Seed Innovations

Assuming the 90 days trading horizon Pentair PLC is expected to under-perform the Seed Innovations. But the stock apears to be less risky and, when comparing its historical volatility, Pentair PLC is 1.17 times less risky than Seed Innovations. The stock trades about -0.28 of its potential returns per unit of risk. The Seed Innovations is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  155.00  in Seed Innovations on October 8, 2024 and sell it today you would earn a total of  12.00  from holding Seed Innovations or generate 7.74% return on investment over 90 days.

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

Pentair PLC  vs.  Seed Innovations

Pentair PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 5 (%) 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.

Seed Innovations

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seed Innovations are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Seed Innovations is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pentair PLC and Seed Innovations

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

The idea behind Pentair PLC and Seed Innovations 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.