Correlation Between Pentair PLC and Nordson

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Can any of the company-specific risk be diversified away by investing in both Pentair PLC and Nordson 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 Nordson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and Nordson, you can compare the effects of market volatilities on Pentair PLC and Nordson 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 Nordson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and Nordson.

Diversification Opportunities for Pentair PLC and Nordson

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Pentair and Nordson is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Nordson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordson 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 Nordson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordson has no effect on the direction of Pentair PLC i.e., Pentair PLC and Nordson go up and down completely randomly.

Pair Corralation between Pentair PLC and Nordson

Considering the 90-day investment horizon Pentair PLC is expected to generate 0.86 times more return on investment than Nordson. However, Pentair PLC is 1.17 times less risky than Nordson. It trades about 0.41 of its potential returns per unit of risk. Nordson is currently generating about 0.07 per unit of risk. If you would invest  8,492  in Pentair PLC on September 6, 2024 and sell it today you would earn a total of  2,384  from holding Pentair PLC or generate 28.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Pentair PLC  vs.  Nordson

 Performance 
       Timeline  
Pentair PLC 

Risk-Adjusted Performance

31 of 100

 
Weak
 
Strong
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 31 (%) 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.
Nordson 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Nordson are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Nordson is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pentair PLC and Nordson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pentair PLC and Nordson

The main advantage of trading using opposite Pentair PLC and Nordson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, Nordson 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 Nordson will offset losses from the drop in Nordson's long position.
The idea behind Pentair PLC and Nordson 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.
Check out your portfolio center.
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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