Correlation Between Pentair PLC and Franklin Credit

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

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

Diversification Opportunities for Pentair PLC and Franklin Credit

0.04

Correlation Coefficient

Pentair PLC  Franklin Credit

Significant diversification

The 3 months correlation between Pentair and Franklin is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Franklin Credit Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Credit Mana 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 Franklin Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Credit Mana has no effect on the direction of Pentair PLC i.e., Pentair PLC and Franklin Credit go up and down completely randomly.

Pair Corralation between Pentair PLC and Franklin Credit

Considering the 90-day investment horizon Pentair PLC is expected to generate 2.61 times less return on investment than Franklin Credit. But when comparing it to its historical volatility, Pentair PLC is 7.19 times less risky than Franklin Credit. It trades about 0.1 of its potential returns per unit of risk. Franklin Credit Management is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Franklin Credit Management on October 11, 2024 and sell it today you would lose (14.00) from holding Franklin Credit Management or give up 56.0% of portfolio value over 90 days.

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

Pentair PLC  vs.  Franklin Credit Management

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. Even with relatively invariable basic indicators, Pentair PLC is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Franklin Credit Mana

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Credit Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Franklin Credit displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair PLC and Franklin Credit

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

The idea behind Pentair PLC and Franklin Credit Management 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.