Correlation Between Pentair PLC and Rocky Mountain

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

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

Diversification Opportunities for Pentair PLC and Rocky Mountain

0.58

Correlation Coefficient

Pentair PLC  Rocky Mountain

Very weak diversification

The 3 months correlation between Pentair and Rocky is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Rocky Mountain Chocolate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Chocolate 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 Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Chocolate has no effect on the direction of Pentair PLC i.e., Pentair PLC and Rocky Mountain go up and down completely randomly.

Pair Corralation between Pentair PLC and Rocky Mountain

Considering the 90-day investment horizon Pentair PLC is expected to under-perform the Rocky Mountain. But the stock apears to be less risky and, when comparing its historical volatility, Pentair PLC is 2.99 times less risky than Rocky Mountain. The stock trades about -0.32 of its potential returns per unit of risk. The Rocky Mountain Chocolate is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  296.00  in Rocky Mountain Chocolate on October 10, 2024 and sell it today you would lose (23.00) from holding Rocky Mountain Chocolate or give up 7.77% of portfolio value over 90 days.

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

Pentair PLC  vs.  Rocky Mountain Chocolate

Pentair PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 4 (%) 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.

Rocky Mountain Chocolate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain Chocolate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Rocky Mountain reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair PLC and Rocky Mountain

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

The idea behind Pentair PLC and Rocky Mountain Chocolate 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.