Correlation Between Pentair PLC and Evolution Mining

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

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

Diversification Opportunities for Pentair PLC and Evolution Mining

0.13

Correlation Coefficient

Pentair PLC  Evolution Mining

Average diversification

The 3 months correlation between Pentair and Evolution is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining 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 Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of Pentair PLC i.e., Pentair PLC and Evolution Mining go up and down completely randomly.

Pair Corralation between Pentair PLC and Evolution Mining

Considering the 90-day investment horizon Pentair PLC is expected to generate 0.49 times more return on investment than Evolution Mining. However, Pentair PLC is 2.06 times less risky than Evolution Mining. It trades about -0.21 of its potential returns per unit of risk. Evolution Mining is currently generating about -0.25 per unit of risk. If you would invest  10,794  in Pentair PLC on September 25, 2024 and sell it today you would lose (559.00) from holding Pentair PLC or give up 5.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Pentair PLC  vs.  Evolution Mining

Pentair PLC

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Pentair PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Evolution Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Pentair PLC and Evolution Mining

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

The idea behind Pentair PLC and Evolution Mining 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.