Correlation Between Pentair PLC and Virgin Wines

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

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

Diversification Opportunities for Pentair PLC and Virgin Wines

-0.19

Correlation Coefficient

Pentair PLC  Virgin Wines

Good diversification

The 3 months correlation between Pentair and Virgin is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK 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 Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of Pentair PLC i.e., Pentair PLC and Virgin Wines go up and down completely randomly.

Pair Corralation between Pentair PLC and Virgin Wines

Assuming the 90 days trading horizon Pentair PLC is expected to generate 0.77 times more return on investment than Virgin Wines. However, Pentair PLC is 1.3 times less risky than Virgin Wines. It trades about 0.09 of its potential returns per unit of risk. Virgin Wines UK is currently generating about -0.09 per unit of risk. If you would invest  9,893  in Pentair PLC on October 25, 2024 and sell it today you would earn a total of  555.00  from holding Pentair PLC or generate 5.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Pentair PLC  vs.  Virgin Wines UK

Pentair PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Pentair PLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Virgin Wines UK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virgin Wines UK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Pentair PLC and Virgin Wines

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

The idea behind Pentair PLC and Virgin Wines UK 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.