Correlation Between Barnes and Pentair PLC

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

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

Diversification Opportunities for Barnes and Pentair PLC

0.76

Correlation Coefficient

Barnes  Pentair PLC

Poor diversification

The 3 months correlation between Barnes and Pentair is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Barnes 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 Barnes 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 Barnes i.e., Barnes and Pentair PLC go up and down completely randomly.

Pair Corralation between Barnes and Pentair PLC

Taking into account the 90-day investment horizon Barnes Group is expected to generate 0.05 times more return on investment than Pentair PLC. However, Barnes Group is 18.84 times less risky than Pentair PLC. It trades about 0.34 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.12 per unit of risk. If you would invest  4,726  in Barnes Group on December 28, 2024 and sell it today you would earn a total of  22.00  from holding Barnes Group or generate 0.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	30.0%
Values	Daily Returns

Barnes Group  vs.  Pentair PLC

Barnes Group

Risk-Adjusted Performance

Strong

Over the last 90 days Barnes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Barnes is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 Barnes and Pentair PLC

The main advantage of trading using opposite Barnes and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes 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 Barnes Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.