Correlation Between Pentair PLC and Xunlei

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

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

Diversification Opportunities for Pentair PLC and Xunlei

-0.07

Correlation Coefficient

Pentair PLC  Xunlei

Good diversification

The 3 months correlation between Pentair and Xunlei is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of Pentair PLC i.e., Pentair PLC and Xunlei go up and down completely randomly.

Pair Corralation between Pentair PLC and Xunlei

Considering the 90-day investment horizon Pentair PLC is expected to generate 0.5 times more return on investment than Xunlei. However, Pentair PLC is 2.01 times less risky than Xunlei. It trades about 0.09 of its potential returns per unit of risk. Xunlei Ltd Adr is currently generating about 0.01 per unit of risk. If you would invest  4,932  in Pentair PLC on October 12, 2024 and sell it today you would earn a total of  4,765  from holding Pentair PLC or generate 96.61% return on investment over 90 days.

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

Pentair PLC  vs.  Xunlei Ltd Adr

Pentair PLC

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Pentair PLC has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Xunlei Ltd Adr

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Xunlei Ltd Adr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Xunlei is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pentair PLC and Xunlei

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

The idea behind Pentair PLC and Xunlei Ltd Adr 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.