Correlation Between Pentair PLC and 31620MBV7

Can any of the company-specific risk be diversified away by investing in both Pentair PLC and 31620MBV7 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 31620MBV7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pentair PLC and US31620MBV72, you can compare the effects of market volatilities on Pentair PLC and 31620MBV7 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 31620MBV7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and 31620MBV7.

Diversification Opportunities for Pentair PLC and 31620MBV7

-0.55

Correlation Coefficient

Pentair PLC  31620MBV7

Excellent diversification

The 3 months correlation between Pentair and 31620MBV7 is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and US31620MBV72 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US31620MBV72 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 31620MBV7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US31620MBV72 has no effect on the direction of Pentair PLC i.e., Pentair PLC and 31620MBV7 go up and down completely randomly.

Pair Corralation between Pentair PLC and 31620MBV7

Considering the 90-day investment horizon Pentair PLC is expected to generate 4.87 times more return on investment than 31620MBV7. However, Pentair PLC is 4.87 times more volatile than US31620MBV72. It trades about 0.11 of its potential returns per unit of risk. US31620MBV72 is currently generating about 0.01 per unit of risk. If you would invest  5,669  in Pentair PLC on September 14, 2024 and sell it today you would earn a total of  5,160  from holding Pentair PLC or generate 91.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.89%
Values	Daily Returns

Pentair PLC  vs.  US31620MBV72

Pentair PLC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Pentair PLC reported solid returns over the last few months and may actually be approaching a breakup point.

US31620MBV72

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US31620MBV72 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 31620MBV7 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pentair PLC and 31620MBV7

The main advantage of trading using opposite Pentair PLC and 31620MBV7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, 31620MBV7 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 31620MBV7 will offset losses from the drop in 31620MBV7's long position.

The idea behind Pentair PLC and US31620MBV72 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 Stocks Directory module to find actively traded stocks across global markets.