Correlation Between Mitie Group and Pentair PLC

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

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

Diversification Opportunities for Mitie Group and Pentair PLC

-0.14

Correlation Coefficient

Mitie Group  Pentair PLC

Good diversification

The 3 months correlation between Mitie and Pentair is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Mitie Group PLC and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Mitie Group 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 Mitie Group PLC 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 Mitie Group i.e., Mitie Group and Pentair PLC go up and down completely randomly.

Pair Corralation between Mitie Group and Pentair PLC

Assuming the 90 days trading horizon Mitie Group PLC is expected to generate 0.97 times more return on investment than Pentair PLC. However, Mitie Group PLC is 1.03 times less risky than Pentair PLC. It trades about 0.06 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.18 per unit of risk. If you would invest  10,900  in Mitie Group PLC on December 23, 2024 and sell it today you would earn a total of  440.00  from holding Mitie Group PLC or generate 4.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Mitie Group PLC  vs.  Pentair PLC

Mitie Group PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitie Group PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Mitie Group is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Mitie Group and Pentair PLC

The main advantage of trading using opposite Mitie Group and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitie Group 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 Mitie Group PLC 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.