Correlation Between Pentair Plc and Ecotel Communication

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

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

Diversification Opportunities for Pentair Plc and Ecotel Communication

0.62

Correlation Coefficient

Pentair Plc  Ecotel Communication

Poor diversification

The 3 months correlation between Pentair and Ecotel is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and ecotel communication ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ecotel communication 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 Ecotel Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ecotel communication has no effect on the direction of Pentair Plc i.e., Pentair Plc and Ecotel Communication go up and down completely randomly.

Pair Corralation between Pentair Plc and Ecotel Communication

Assuming the 90 days horizon Pentair plc is expected to generate 0.91 times more return on investment than Ecotel Communication. However, Pentair plc is 1.09 times less risky than Ecotel Communication. It trades about 0.14 of its potential returns per unit of risk. ecotel communication ag is currently generating about 0.05 per unit of risk. If you would invest  8,806  in Pentair plc on October 10, 2024 and sell it today you would earn a total of  940.00  from holding Pentair plc or generate 10.67% return on investment over 90 days.

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

Pentair plc  vs.  ecotel communication ag

Pentair plc

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 10 (%) 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.

ecotel communication

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ecotel communication ag are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Ecotel Communication is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pentair Plc and Ecotel Communication

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

The idea behind Pentair plc and ecotel communication ag 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.