Correlation Between Pentair Plc and Lions Gate

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

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

Diversification Opportunities for Pentair Plc and Lions Gate

0.53

Correlation Coefficient

Pentair Plc  Lions Gate

Very weak diversification

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

Pair Corralation between Pentair Plc and Lions Gate

Assuming the 90 days horizon Pentair plc is expected to under-perform the Lions Gate. But the stock apears to be less risky and, when comparing its historical volatility, Pentair plc is 1.84 times less risky than Lions Gate. The stock trades about -0.25 of its potential returns per unit of risk. The Lions Gate Entertainment is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  675.00  in Lions Gate Entertainment on October 11, 2024 and sell it today you would earn a total of  60.00  from holding Lions Gate Entertainment or generate 8.89% 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.  Lions Gate Entertainment

Pentair plc

Risk-Adjusted Performance

10 of 100

OK

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.

Lions Gate Entertainment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lions Gate Entertainment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lions Gate reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair Plc and Lions Gate

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

The idea behind Pentair plc and Lions Gate Entertainment 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.