Correlation Between Pentair Plc and AutoZone

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

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

Diversification Opportunities for Pentair Plc and AutoZone

-0.58

Correlation Coefficient

Pentair Plc  AutoZone

Excellent diversification

The 3 months correlation between Pentair and AutoZone is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone 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 AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of Pentair Plc i.e., Pentair Plc and AutoZone go up and down completely randomly.

Pair Corralation between Pentair Plc and AutoZone

Assuming the 90 days horizon Pentair plc is expected to under-perform the AutoZone. In addition to that, Pentair Plc is 1.27 times more volatile than AutoZone. It trades about -0.19 of its total potential returns per unit of risk. AutoZone is currently generating about 0.1 per unit of volatility. If you would invest  311,400  in AutoZone on December 23, 2024 and sell it today you would earn a total of  22,200  from holding AutoZone or generate 7.13% 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.  AutoZone

Pentair plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pentair plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AutoZone

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AutoZone may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pentair Plc and AutoZone

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

The idea behind Pentair plc and AutoZone 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.