Correlation Between PENN NATL and Pentair Plc
Can any of the company-specific risk be diversified away by investing in both PENN NATL 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 PENN NATL and Pentair Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PENN NATL GAMING and Pentair plc, you can compare the effects of market volatilities on PENN NATL 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 PENN NATL with a short position of Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Pentair Plc.
Diversification Opportunities for PENN NATL and Pentair Plc
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PENN and Pentair is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and PENN NATL 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 PENN NATL GAMING 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 PENN NATL i.e., PENN NATL and Pentair Plc go up and down completely randomly.
Pair Corralation between PENN NATL and Pentair Plc
Assuming the 90 days trading horizon PENN NATL GAMING is expected to generate 1.93 times more return on investment than Pentair Plc. However, PENN NATL is 1.93 times more volatile than Pentair plc. It trades about 0.07 of its potential returns per unit of risk. Pentair plc is currently generating about 0.12 per unit of risk. If you would invest 1,740 in PENN NATL GAMING on October 6, 2024 and sell it today you would earn a total of 119.00 from holding PENN NATL GAMING or generate 6.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
PENN NATL GAMING vs. Pentair plc
Performance |
Timeline |
PENN NATL GAMING |
Pentair plc |
PENN NATL and Pentair Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PENN NATL and Pentair Plc
The main advantage of trading using opposite PENN NATL and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL 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.PENN NATL vs. Zijin Mining Group | PENN NATL vs. ANGLO ASIAN MINING | PENN NATL vs. Chuangs China Investments | PENN NATL vs. Eurasia Mining Plc |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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