Correlation Between Pandora A/S and Pentair Plc

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

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

Diversification Opportunities for Pandora A/S and Pentair Plc

0.23

Correlation Coefficient

Pandora A/S  Pentair Plc

Modest diversification

The 3 months correlation between Pandora and Pentair is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Pandora AS and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and Pandora A/S 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 Pandora AS 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 Pandora A/S i.e., Pandora A/S and Pentair Plc go up and down completely randomly.

Pair Corralation between Pandora A/S and Pentair Plc

Assuming the 90 days horizon Pandora AS is expected to generate 1.3 times more return on investment than Pentair Plc. However, Pandora A/S is 1.3 times more volatile than Pentair plc. It trades about 0.34 of its potential returns per unit of risk. Pentair plc is currently generating about -0.27 per unit of risk. If you would invest  15,830  in Pandora AS on October 5, 2024 and sell it today you would earn a total of  1,865  from holding Pandora AS or generate 11.78% return on investment over 90 days.

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

Pandora AS  vs.  Pentair plc

Pandora A/S

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Pandora AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Pandora A/S reported solid returns over the last few months and may actually be approaching a breakup point.

Pentair plc

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Pentair plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Pentair Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pandora A/S and Pentair Plc

The main advantage of trading using opposite Pandora A/S and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pandora A/S 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 Pandora AS 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.