Correlation Between PARK24 CO and Pentair Plc

Can any of the company-specific risk be diversified away by investing in both PARK24 CO 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 PARK24 CO and Pentair Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PARK24 LTD and Pentair plc, you can compare the effects of market volatilities on PARK24 CO 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 PARK24 CO with a short position of Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of PARK24 CO and Pentair Plc.

Diversification Opportunities for PARK24 CO and Pentair Plc

0.75

Correlation Coefficient

PARK24 CO  Pentair Plc

Poor diversification

The 3 months correlation between PARK24 and Pentair is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PARK24 LTD and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and PARK24 CO 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 PARK24 LTD 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 PARK24 CO i.e., PARK24 CO and Pentair Plc go up and down completely randomly.

Pair Corralation between PARK24 CO and Pentair Plc

Assuming the 90 days horizon PARK24 LTD is expected to generate 2.35 times more return on investment than Pentair Plc. However, PARK24 CO is 2.35 times more volatile than Pentair plc. It trades about 0.27 of its potential returns per unit of risk. Pentair plc is currently generating about -0.18 per unit of risk. If you would invest  1,090  in PARK24 LTD on October 8, 2024 and sell it today you would earn a total of  180.00  from holding PARK24 LTD or generate 16.51% return on investment over 90 days.

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

PARK24 LTD  vs.  Pentair plc

PARK24 LTD

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PARK24 LTD are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PARK24 CO reported solid returns over the last few months and may actually be approaching a breakup point.

Pentair plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pentair Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PARK24 CO and Pentair Plc

The main advantage of trading using opposite PARK24 CO and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PARK24 CO 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 PARK24 LTD 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.