Correlation Between Pentair Plc and PTT Global

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

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

Diversification Opportunities for Pentair Plc and PTT Global

-0.69

Correlation Coefficient

Pentair Plc  PTT Global

Excellent diversification

The 3 months correlation between Pentair and PTT is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and PTT Global Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTT Global Chemical 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 PTT Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTT Global Chemical has no effect on the direction of Pentair Plc i.e., Pentair Plc and PTT Global go up and down completely randomly.

Pair Corralation between Pentair Plc and PTT Global

Assuming the 90 days horizon Pentair Plc is expected to generate 4.67 times less return on investment than PTT Global. But when comparing it to its historical volatility, Pentair plc is 13.11 times less risky than PTT Global. It trades about 0.11 of its potential returns per unit of risk. PTT Global Chemical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  95.00  in PTT Global Chemical on September 12, 2024 and sell it today you would lose (30.00) from holding PTT Global Chemical or give up 31.58% of portfolio value over 90 days.

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

Pentair plc  vs.  PTT Global Chemical

Pentair plc

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 27 (%) 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.

PTT Global Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PTT Global Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PTT Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pentair Plc and PTT Global

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

The idea behind Pentair plc and PTT Global Chemical 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.