Correlation Between Pentair PLC and Vast Renewables

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

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

Diversification Opportunities for Pentair PLC and Vast Renewables

0.84

Correlation Coefficient

Pentair PLC  Vast Renewables

Very poor diversification

The 3 months correlation between Pentair and Vast is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Vast Renewables Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vast Renewables 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 Vast Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vast Renewables has no effect on the direction of Pentair PLC i.e., Pentair PLC and Vast Renewables go up and down completely randomly.

Pair Corralation between Pentair PLC and Vast Renewables

Considering the 90-day investment horizon Pentair PLC is expected to generate 0.19 times more return on investment than Vast Renewables. However, Pentair PLC is 5.17 times less risky than Vast Renewables. It trades about -0.17 of its potential returns per unit of risk. Vast Renewables Limited is currently generating about -0.25 per unit of risk. If you would invest  10,074  in Pentair PLC on December 19, 2024 and sell it today you would lose (1,337) from holding Pentair PLC or give up 13.27% of portfolio value over 90 days.

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

Pentair PLC  vs.  Vast Renewables Limited

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 abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Vast Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vast Renewables Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Pentair PLC and Vast Renewables

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

The idea behind Pentair PLC and Vast Renewables Limited 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.