Correlation Between Pentair Plc and PURETECH HEALTH

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

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

Diversification Opportunities for Pentair Plc and PURETECH HEALTH

0.68

Correlation Coefficient

Pentair Plc  PURETECH HEALTH

Poor diversification

The 3 months correlation between Pentair and PURETECH is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and PURETECH HEALTH PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PURETECH HEALTH PLC 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 PURETECH HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PURETECH HEALTH PLC has no effect on the direction of Pentair Plc i.e., Pentair Plc and PURETECH HEALTH go up and down completely randomly.

Pair Corralation between Pentair Plc and PURETECH HEALTH

Assuming the 90 days horizon Pentair plc is expected to generate 0.45 times more return on investment than PURETECH HEALTH. However, Pentair plc is 2.22 times less risky than PURETECH HEALTH. It trades about 0.12 of its potential returns per unit of risk. PURETECH HEALTH PLC is currently generating about -0.01 per unit of risk. If you would invest  9,116  in Pentair plc on October 6, 2024 and sell it today you would earn a total of  630.00  from holding Pentair plc or generate 6.91% return on investment over 90 days.

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

Pentair plc  vs.  PURETECH HEALTH PLC

Pentair plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pentair Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PURETECH HEALTH PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PURETECH HEALTH PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PURETECH HEALTH may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pentair Plc and PURETECH HEALTH

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

The idea behind Pentair plc and PURETECH HEALTH PLC 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.