Correlation Between Pentair PLC and Wise Plc

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

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

Diversification Opportunities for Pentair PLC and Wise Plc

0.6

Correlation Coefficient

Pentair PLC  Wise Plc

Poor diversification

The 3 months correlation between Pentair and Wise is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Wise plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wise 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 Wise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wise plc has no effect on the direction of Pentair PLC i.e., Pentair PLC and Wise Plc go up and down completely randomly.

Pair Corralation between Pentair PLC and Wise Plc

Assuming the 90 days trading horizon Pentair PLC is expected to under-perform the Wise Plc. But the stock apears to be less risky and, when comparing its historical volatility, Pentair PLC is 1.36 times less risky than Wise Plc. The stock trades about -0.28 of its potential returns per unit of risk. The Wise plc is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest  93,600  in Wise plc on October 8, 2024 and sell it today you would earn a total of  16,000  from holding Wise plc or generate 17.09% return on investment over 90 days.

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

Pentair PLC  vs.  Wise plc

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.

Wise plc

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Wise plc are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wise Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair PLC and Wise Plc

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

The idea behind Pentair PLC and Wise 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.