Correlation Between Pentair Plc and Marfrig Global

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

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

Diversification Opportunities for Pentair Plc and Marfrig Global

0.57

Correlation Coefficient

Pentair Plc  Marfrig Global

Very weak diversification

The 3 months correlation between Pentair and Marfrig is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods 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 Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of Pentair Plc i.e., Pentair Plc and Marfrig Global go up and down completely randomly.

Pair Corralation between Pentair Plc and Marfrig Global

Assuming the 90 days trading horizon Pentair plc is expected to under-perform the Marfrig Global. But the stock apears to be less risky and, when comparing its historical volatility, Pentair plc is 6.3 times less risky than Marfrig Global. The stock trades about -0.14 of its potential returns per unit of risk. The Marfrig Global Foods is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,683  in Marfrig Global Foods on December 25, 2024 and sell it today you would earn a total of  102.00  from holding Marfrig Global Foods or generate 6.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Pentair plc  vs.  Marfrig Global Foods

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. Despite somewhat strong basic indicators, Pentair Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Marfrig Global Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Marfrig Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pentair Plc and Marfrig Global

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

The idea behind Pentair plc and Marfrig Global Foods 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.