Correlation Between Pentair Plc and DocuSign

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

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

Diversification Opportunities for Pentair Plc and DocuSign

0.86

Correlation Coefficient

Pentair Plc  DocuSign

Very poor diversification

The 3 months correlation between Pentair and DocuSign is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and DocuSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DocuSign and Pentair Plc 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 Pentair plc are associated (or correlated) with DocuSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DocuSign has no effect on the direction of Pentair Plc i.e., Pentair Plc and DocuSign go up and down completely randomly.

Pair Corralation between Pentair Plc and DocuSign

Assuming the 90 days trading horizon Pentair Plc is expected to generate 3.06 times less return on investment than DocuSign. But when comparing it to its historical volatility, Pentair plc is 2.66 times less risky than DocuSign. It trades about 0.14 of its potential returns per unit of risk. DocuSign is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,920  in DocuSign on October 9, 2024 and sell it today you would earn a total of  854.00  from holding DocuSign or generate 44.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

Pentair plc  vs.  DocuSign

Pentair plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pentair Plc sustained solid returns over the last few months and may actually be approaching a breakup point.

DocuSign

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DocuSign are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DocuSign sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair Plc and DocuSign

The main advantage of trading using opposite Pentair Plc and DocuSign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair Plc position performs unexpectedly, DocuSign 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 DocuSign will offset losses from the drop in DocuSign's long position.

The idea behind Pentair plc and DocuSign 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.