Correlation Between Pentair PLC and Twin Disc

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

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

Diversification Opportunities for Pentair PLC and Twin Disc

0.94

Correlation Coefficient

Pentair PLC  Twin Disc

Almost no diversification

The 3 months correlation between Pentair and Twin is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Twin Disc Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twin Disc 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 Twin Disc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twin Disc has no effect on the direction of Pentair PLC i.e., Pentair PLC and Twin Disc go up and down completely randomly.

Pair Corralation between Pentair PLC and Twin Disc

Considering the 90-day investment horizon Pentair PLC is expected to generate 0.53 times more return on investment than Twin Disc. However, Pentair PLC is 1.88 times less risky than Twin Disc. It trades about -0.12 of its potential returns per unit of risk. Twin Disc Incorporated is currently generating about -0.17 per unit of risk. If you would invest  10,090  in Pentair PLC on December 27, 2024 and sell it today you would lose (1,077) from holding Pentair PLC or give up 10.67% of portfolio value over 90 days.

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

Pentair PLC  vs.  Twin Disc Incorporated

Pentair PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pentair PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Twin Disc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Twin Disc Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Pentair PLC and Twin Disc

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

The idea behind Pentair PLC and Twin Disc Incorporated 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.