Correlation Between Pentair PLC and National Storage

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

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

Diversification Opportunities for Pentair PLC and National Storage

-0.14

Correlation Coefficient

Pentair PLC  National Storage

Good diversification

The 3 months correlation between Pentair and National is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and National Storage REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage REIT 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage REIT has no effect on the direction of Pentair PLC i.e., Pentair PLC and National Storage go up and down completely randomly.

Pair Corralation between Pentair PLC and National Storage

Considering the 90-day investment horizon Pentair PLC is expected to generate 0.44 times more return on investment than National Storage. However, Pentair PLC is 2.28 times less risky than National Storage. It trades about -0.31 of its potential returns per unit of risk. National Storage REIT is currently generating about -0.23 per unit of risk. If you would invest  10,787  in Pentair PLC on October 11, 2024 and sell it today you would lose (840.00) from holding Pentair PLC or give up 7.79% of portfolio value over 90 days.

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

Pentair PLC  vs.  National Storage REIT

Pentair PLC

Risk-Adjusted Performance

2 of 100

Weak

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.

National Storage REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storage REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, National Storage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pentair PLC and National Storage

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

The idea behind Pentair PLC and National Storage REIT 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.