Correlation Between Alta Equipment and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Alta Equipment 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 Alta Equipment and Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alta Equipment Group and Pentair PLC, you can compare the effects of market volatilities on Alta Equipment 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 Alta Equipment with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and Pentair PLC.
Diversification Opportunities for Alta Equipment and Pentair PLC
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alta and Pentair is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Alta Equipment 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 Alta Equipment Group 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 Alta Equipment i.e., Alta Equipment and Pentair PLC go up and down completely randomly.
Pair Corralation between Alta Equipment and Pentair PLC
Given the investment horizon of 90 days Alta Equipment Group is expected to under-perform the Pentair PLC. In addition to that, Alta Equipment is 2.3 times more volatile than Pentair PLC. It trades about -0.34 of its total potential returns per unit of risk. Pentair PLC is currently generating about -0.37 per unit of volatility. If you would invest 10,824 in Pentair PLC on October 9, 2024 and sell it today you would lose (956.00) from holding Pentair PLC or give up 8.83% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Alta Equipment Group vs. Pentair PLC
Performance |
Timeline |
Alta Equipment Group |
Pentair PLC |
Alta Equipment and Pentair PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alta Equipment and Pentair PLC
The main advantage of trading using opposite Alta Equipment and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alta Equipment 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.Alta Equipment vs. PROG Holdings | Alta Equipment vs. GATX Corporation | Alta Equipment vs. McGrath RentCorp | Alta Equipment vs. Custom Truck One |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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