Correlation Between Pentair Plc and Sabre Insurance

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

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

Diversification Opportunities for Pentair Plc and Sabre Insurance

-0.32

Correlation Coefficient

Pentair Plc  Sabre Insurance

Very good diversification

The 3 months correlation between Pentair and Sabre is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Sabre Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabre Insurance Group 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 Sabre Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabre Insurance Group has no effect on the direction of Pentair Plc i.e., Pentair Plc and Sabre Insurance go up and down completely randomly.

Pair Corralation between Pentair Plc and Sabre Insurance

Assuming the 90 days horizon Pentair plc is expected to generate 0.42 times more return on investment than Sabre Insurance. However, Pentair plc is 2.41 times less risky than Sabre Insurance. It trades about 0.13 of its potential returns per unit of risk. Sabre Insurance Group is currently generating about -0.2 per unit of risk. If you would invest  9,762  in Pentair plc on October 22, 2024 and sell it today you would earn a total of  186.00  from holding Pentair plc or generate 1.91% 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.  Sabre Insurance Group

Pentair plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pentair Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sabre Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pentair Plc and Sabre Insurance

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

The idea behind Pentair plc and Sabre Insurance Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.