Correlation Between Pentair Plc and Philip Morris

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

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

Diversification Opportunities for Pentair Plc and Philip Morris

0.78

Correlation Coefficient

Pentair Plc  Philip Morris

Poor diversification

The 3 months correlation between Pentair and Philip is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern 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 Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of Pentair Plc i.e., Pentair Plc and Philip Morris go up and down completely randomly.

Pair Corralation between Pentair Plc and Philip Morris

Assuming the 90 days horizon Pentair plc is expected to under-perform the Philip Morris. In addition to that, Pentair Plc is 1.99 times more volatile than Philip Morris International. It trades about -0.18 of its total potential returns per unit of risk. Philip Morris International is currently generating about -0.26 per unit of volatility. If you would invest  12,058  in Philip Morris International on October 9, 2024 and sell it today you would lose (418.00) from holding Philip Morris International or give up 3.47% of portfolio value over 90 days.

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

Pentair plc  vs.  Philip Morris International

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.

Philip Morris Intern

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Philip Morris may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pentair Plc and Philip Morris

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

The idea behind Pentair plc and Philip Morris International 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.