Correlation Between Pembina Pipeline and Pentair Plc

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

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

Diversification Opportunities for Pembina Pipeline and Pentair Plc

0.03

Correlation Coefficient

Pembina Pipeline  Pentair Plc

Significant diversification

The 3 months correlation between Pembina and Pentair is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and Pembina Pipeline 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 Pembina Pipeline Corp 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 Pembina Pipeline i.e., Pembina Pipeline and Pentair Plc go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Pentair Plc

Assuming the 90 days horizon Pembina Pipeline Corp is expected to generate 1.0 times more return on investment than Pentair Plc. However, Pembina Pipeline Corp is 1.0 times less risky than Pentair Plc. It trades about 0.05 of its potential returns per unit of risk. Pentair plc is currently generating about -0.19 per unit of risk. If you would invest  3,431  in Pembina Pipeline Corp on December 22, 2024 and sell it today you would earn a total of  127.00  from holding Pembina Pipeline Corp or generate 3.7% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Pentair plc

Pembina Pipeline Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Pembina Pipeline and Pentair Plc

The main advantage of trading using opposite Pembina Pipeline and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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 Pembina Pipeline Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.