Correlation Between Pentair PLC and Smithfield Foods

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

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

Diversification Opportunities for Pentair PLC and Smithfield Foods

0.0

Correlation Coefficient

Pentair PLC  Smithfield Foods

Pay attention - limited upside

The 3 months correlation between Pentair and Smithfield is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Smithfield Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithfield Foods 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 Smithfield Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithfield Foods has no effect on the direction of Pentair PLC i.e., Pentair PLC and Smithfield Foods go up and down completely randomly.

Pair Corralation between Pentair PLC and Smithfield Foods

If you would invest  9,939  in Pentair PLC on October 24, 2024 and sell it today you would earn a total of  363.00  from holding Pentair PLC or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Pentair PLC  vs.  Smithfield Foods

Pentair PLC

Risk-Adjusted Performance

4 of 100

OK

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.

Smithfield Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smithfield Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Smithfield Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pentair PLC and Smithfield Foods

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

The idea behind Pentair PLC and Smithfield Foods 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .