Correlation Between Premier Foods and Pentair PLC

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

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

Diversification Opportunities for Premier Foods and Pentair PLC

0.33

Correlation Coefficient

Premier Foods  Pentair PLC

Weak diversification

The 3 months correlation between Premier and Pentair is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Premier Foods 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 Premier Foods 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 Premier Foods i.e., Premier Foods and Pentair PLC go up and down completely randomly.

Pair Corralation between Premier Foods and Pentair PLC

Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.83 times more return on investment than Pentair PLC. However, Premier Foods PLC is 1.21 times less risky than Pentair PLC. It trades about -0.12 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.37 per unit of risk. If you would invest  18,480  in Premier Foods PLC on October 11, 2024 and sell it today you would lose (440.00) from holding Premier Foods PLC or give up 2.38% of portfolio value over 90 days.

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

Premier Foods PLC  vs.  Pentair PLC

Premier Foods PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Foods PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Premier Foods is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pentair PLC

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pentair PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Premier Foods and Pentair PLC

The main advantage of trading using opposite Premier Foods and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods 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 Premier Foods 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.