Correlation Between Pentair PLC and Companhia Paranaense

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

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

Diversification Opportunities for Pentair PLC and Companhia Paranaense

-0.3

Correlation Coefficient

Pentair PLC  Companhia Paranaense

Very good diversification

The 3 months correlation between Pentair and Companhia is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense 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 Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of Pentair PLC i.e., Pentair PLC and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Pentair PLC and Companhia Paranaense

Considering the 90-day investment horizon Pentair PLC is expected to under-perform the Companhia Paranaense. But the stock apears to be less risky and, when comparing its historical volatility, Pentair PLC is 1.73 times less risky than Companhia Paranaense. The stock trades about -0.15 of its potential returns per unit of risk. The Companhia Paranaense de is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  546.00  in Companhia Paranaense de on December 20, 2024 and sell it today you would earn a total of  123.00  from holding Companhia Paranaense de or generate 22.53% return on investment over 90 days.

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

Pentair PLC  vs.  Companhia Paranaense de

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. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Companhia Paranaense

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Companhia Paranaense exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair PLC and Companhia Paranaense

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

The idea behind Pentair PLC and Companhia Paranaense de 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.