Correlation Between MEDICAL FACILITIES and Pentair Plc

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

By analyzing existing cross correlation between MEDICAL FACILITIES NEW and Pentair plc, you can compare the effects of market volatilities on MEDICAL FACILITIES and Pentair 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 MEDICAL FACILITIES with a short position of Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEDICAL FACILITIES and Pentair Plc.

Diversification Opportunities for MEDICAL FACILITIES and Pentair Plc

0.84

Correlation Coefficient

MEDICAL FACILITIES  Pentair Plc

Very poor diversification

The 3 months correlation between MEDICAL and Pentair is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MEDICAL FACILITIES NEW and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and MEDICAL FACILITIES 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 MEDICAL FACILITIES NEW are associated (or correlated) with Pentair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair plc has no effect on the direction of MEDICAL FACILITIES i.e., MEDICAL FACILITIES and Pentair Plc go up and down completely randomly.

Pair Corralation between MEDICAL FACILITIES and Pentair Plc

Assuming the 90 days horizon MEDICAL FACILITIES NEW is expected to generate 0.94 times more return on investment than Pentair Plc. However, MEDICAL FACILITIES NEW is 1.06 times less risky than Pentair Plc. It trades about -0.07 of its potential returns per unit of risk. Pentair plc is currently generating about -0.15 per unit of risk. If you would invest  1,071  in MEDICAL FACILITIES NEW on October 17, 2024 and sell it today you would lose (21.00) from holding MEDICAL FACILITIES NEW or give up 1.96% of portfolio value over 90 days.

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

MEDICAL FACILITIES NEW  vs.  Pentair plc

MEDICAL FACILITIES NEW

Risk-Adjusted Performance

6 of 100

OK

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

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. Despite nearly stable basic indicators, Pentair Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MEDICAL FACILITIES and Pentair Plc

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

The idea behind MEDICAL FACILITIES NEW and Pentair 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.