Correlation Between Pentair PLC and Bank

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

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

Diversification Opportunities for Pentair PLC and Bank

0.27

Correlation Coefficient

Pentair PLC  Bank

Modest diversification

The 3 months correlation between Pentair and Bank is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank 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 Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank has no effect on the direction of Pentair PLC i.e., Pentair PLC and Bank go up and down completely randomly.

Pair Corralation between Pentair PLC and Bank

If you would invest  9,059  in Pentair PLC on September 12, 2024 and sell it today you would earn a total of  1,728  from holding Pentair PLC or generate 19.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Pentair PLC  vs.  Bank

Pentair PLC

Risk-Adjusted Performance

24 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Pentair PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pentair PLC and Bank

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

The idea behind Pentair PLC and Bank 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.