Correlation Between Pentair PLC and Workspace Group

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

Diversification Opportunities for Pentair PLC and Workspace Group

-0.87

Correlation Coefficient

Pentair PLC  Workspace Group

Pay attention - limited upside

The 3 months correlation between Pentair and Workspace is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Workspace Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workspace 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 Workspace Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workspace Group PLC has no effect on the direction of Pentair PLC i.e., Pentair PLC and Workspace Group go up and down completely randomly.

Pair Corralation between Pentair PLC and Workspace Group

Assuming the 90 days trading horizon Pentair PLC is expected to generate 0.56 times more return on investment than Workspace Group. However, Pentair PLC is 1.78 times less risky than Workspace Group. It trades about 0.26 of its potential returns per unit of risk. Workspace Group PLC is currently generating about -0.21 per unit of risk. If you would invest  9,195  in Pentair PLC on September 15, 2024 and sell it today you would earn a total of  1,493  from holding Pentair PLC or generate 16.24% return on investment over 90 days.

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

Pentair PLC  vs.  Workspace Group PLC

Pentair PLC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 20 (%) 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.

Workspace Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Workspace Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Pentair PLC and Workspace Group

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

The idea behind Pentair PLC and Workspace 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.