Correlation Between AerSale Corp and Pentair PLC

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

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

Diversification Opportunities for AerSale Corp and Pentair PLC

-0.82

Correlation Coefficient

AerSale Corp  Pentair PLC

Pay attention - limited upside

The 3 months correlation between AerSale and Pentair is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding AerSale Corp and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and AerSale Corp 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 AerSale Corp 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 AerSale Corp i.e., AerSale Corp and Pentair PLC go up and down completely randomly.

Pair Corralation between AerSale Corp and Pentair PLC

Given the investment horizon of 90 days AerSale Corp is expected to generate 1.89 times more return on investment than Pentair PLC. However, AerSale Corp is 1.89 times more volatile than Pentair PLC. It trades about 0.16 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.12 per unit of risk. If you would invest  615.00  in AerSale Corp on December 29, 2024 and sell it today you would earn a total of  166.00  from holding AerSale Corp or generate 26.99% return on investment over 90 days.

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

AerSale Corp  vs.  Pentair PLC

AerSale Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerSale Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, AerSale Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pentair PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pentair PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with AerSale Corp and Pentair PLC

The main advantage of trading using opposite AerSale Corp and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AerSale Corp 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 AerSale Corp 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.