Correlation Between Ashtead Technology and Pentair PLC

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

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

Diversification Opportunities for Ashtead Technology and Pentair PLC

-0.66

Correlation Coefficient

Ashtead Technology  Pentair PLC

Excellent diversification

The 3 months correlation between Ashtead and Pentair is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Technology Holdings and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Ashtead Technology 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 Ashtead Technology Holdings 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 Ashtead Technology i.e., Ashtead Technology and Pentair PLC go up and down completely randomly.

Pair Corralation between Ashtead Technology and Pentair PLC

Assuming the 90 days trading horizon Ashtead Technology Holdings is expected to under-perform the Pentair PLC. In addition to that, Ashtead Technology is 2.97 times more volatile than Pentair PLC. It trades about -0.08 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.26 per unit of volatility. If you would invest  9,195  in Pentair PLC on September 15, 2024 and sell it today you would earn a total of  1,493  from holding Pentair PLC or generate 16.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Ashtead Technology Holdings  vs.  Pentair PLC

Ashtead Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashtead Technology Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pentair PLC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pentair PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ashtead Technology and Pentair PLC

The main advantage of trading using opposite Ashtead Technology and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashtead Technology 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 Ashtead Technology Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.