Correlation Between Pentair Plc and DATAGROUP

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

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

Diversification Opportunities for Pentair Plc and DATAGROUP

0.53

Correlation Coefficient

Pentair Plc  DATAGROUP

Very weak diversification

The 3 months correlation between Pentair and DATAGROUP is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and DATAGROUP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATAGROUP SE 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 DATAGROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATAGROUP SE has no effect on the direction of Pentair Plc i.e., Pentair Plc and DATAGROUP go up and down completely randomly.

Pair Corralation between Pentair Plc and DATAGROUP

Assuming the 90 days horizon Pentair plc is expected to under-perform the DATAGROUP. But the stock apears to be less risky and, when comparing its historical volatility, Pentair plc is 1.4 times less risky than DATAGROUP. The stock trades about -0.17 of its potential returns per unit of risk. The DATAGROUP SE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,400  in DATAGROUP SE on September 22, 2024 and sell it today you would earn a total of  200.00  from holding DATAGROUP SE or generate 4.55% return on investment over 90 days.

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

Pentair plc  vs.  DATAGROUP SE

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 January 2025.

DATAGROUP SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, DATAGROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair Plc and DATAGROUP

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

The idea behind Pentair plc and DATAGROUP SE 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..