Correlation Between Pentair PLC and John Bean

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

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

Diversification Opportunities for Pentair PLC and John Bean

0.92

Correlation Coefficient

Pentair PLC  John Bean

Almost no diversification

The 3 months correlation between Pentair and John is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and John Bean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Bean Technologies 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 John Bean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Bean Technologies has no effect on the direction of Pentair PLC i.e., Pentair PLC and John Bean go up and down completely randomly.

Pair Corralation between Pentair PLC and John Bean

Considering the 90-day investment horizon Pentair PLC is expected to generate 2.16 times less return on investment than John Bean. But when comparing it to its historical volatility, Pentair PLC is 3.22 times less risky than John Bean. It trades about 0.3 of its potential returns per unit of risk. John Bean Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  8,962  in John Bean Technologies on September 13, 2024 and sell it today you would earn a total of  3,750  from holding John Bean Technologies or generate 41.84% return on investment over 90 days.

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

Pentair PLC  vs.  John Bean Technologies

Pentair PLC

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Pentair PLC reported solid returns over the last few months and may actually be approaching a breakup point.

John Bean Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in John Bean Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, John Bean unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair PLC and John Bean

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

The idea behind Pentair PLC and John Bean Technologies 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.