Correlation Between Pentair Plc and Moneysupermarket

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

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

Diversification Opportunities for Pentair Plc and Moneysupermarket

-0.56

Correlation Coefficient

Pentair Plc  Moneysupermarket

Excellent diversification

The 3 months correlation between Pentair and Moneysupermarket is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Moneysupermarket Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moneysupermarket 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 Moneysupermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moneysupermarket has no effect on the direction of Pentair Plc i.e., Pentair Plc and Moneysupermarket go up and down completely randomly.

Pair Corralation between Pentair Plc and Moneysupermarket

Assuming the 90 days horizon Pentair Plc is expected to generate 2.6 times less return on investment than Moneysupermarket. But when comparing it to its historical volatility, Pentair plc is 1.58 times less risky than Moneysupermarket. It trades about 0.06 of its potential returns per unit of risk. Moneysupermarket Group PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  217.00  in Moneysupermarket Group PLC on September 21, 2024 and sell it today you would earn a total of  6.00  from holding Moneysupermarket Group PLC or generate 2.76% return on investment over 90 days.

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

Pentair plc  vs.  Moneysupermarket Group PLC

Pentair plc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pentair Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Moneysupermarket

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moneysupermarket Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Pentair Plc and Moneysupermarket

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

The idea behind Pentair plc and Moneysupermarket Group 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.