Correlation Between Ebara and Pentair PLC

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

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

Diversification Opportunities for Ebara and Pentair PLC

0.0

Correlation Coefficient

Ebara  Pentair PLC

Pay attention - limited upside

The 3 months correlation between Ebara and Pentair is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ebara and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Ebara 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 Ebara 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 Ebara i.e., Ebara and Pentair PLC go up and down completely randomly.

Pair Corralation between Ebara and Pentair PLC

Assuming the 90 days horizon Ebara is expected to generate 33.27 times more return on investment than Pentair PLC. However, Ebara is 33.27 times more volatile than Pentair PLC. It trades about 0.1 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.09 per unit of risk. If you would invest  4,413  in Ebara on September 30, 2024 and sell it today you would lose (3,213) from holding Ebara or give up 72.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	50.67%
Values	Daily Returns

Ebara  vs.  Pentair PLC

Ebara

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ebara has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ebara is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pentair PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pentair PLC is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ebara and Pentair PLC

The main advantage of trading using opposite Ebara and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ebara 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 Ebara 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.