Correlation Between Pentair PLC and INTERNATIONAL

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

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

Diversification Opportunities for Pentair PLC and INTERNATIONAL

0.16

Correlation Coefficient

Pentair PLC  INTERNATIONAL

Average diversification

The 3 months correlation between Pentair and INTERNATIONAL is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and INTERNATIONAL FLAVORS FRAGRANC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERNATIONAL FLAVORS 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 INTERNATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERNATIONAL FLAVORS has no effect on the direction of Pentair PLC i.e., Pentair PLC and INTERNATIONAL go up and down completely randomly.

Pair Corralation between Pentair PLC and INTERNATIONAL

Considering the 90-day investment horizon Pentair PLC is expected to generate 1.21 times more return on investment than INTERNATIONAL. However, Pentair PLC is 1.21 times more volatile than INTERNATIONAL FLAVORS FRAGRANCES. It trades about 0.12 of its potential returns per unit of risk. INTERNATIONAL FLAVORS FRAGRANCES is currently generating about 0.01 per unit of risk. If you would invest  8,768  in Pentair PLC on October 25, 2024 and sell it today you would earn a total of  1,668  from holding Pentair PLC or generate 19.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.68%
Values	Daily Returns

Pentair PLC  vs.  INTERNATIONAL FLAVORS FRAGRANC

Pentair PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Pentair PLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

INTERNATIONAL FLAVORS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTERNATIONAL FLAVORS FRAGRANCES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, INTERNATIONAL 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 INTERNATIONAL

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

The idea behind Pentair PLC and INTERNATIONAL FLAVORS FRAGRANCES 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.