Correlation Between Pentair Plc and Gruppo Mutuionline

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

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

Diversification Opportunities for Pentair Plc and Gruppo Mutuionline

0.85

Correlation Coefficient

Pentair Plc  Gruppo Mutuionline

Very poor diversification

The 3 months correlation between Pentair and Gruppo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Gruppo Mutuionline SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gruppo Mutuionline SpA 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 Gruppo Mutuionline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gruppo Mutuionline SpA has no effect on the direction of Pentair Plc i.e., Pentair Plc and Gruppo Mutuionline go up and down completely randomly.

Pair Corralation between Pentair Plc and Gruppo Mutuionline

Assuming the 90 days horizon Pentair plc is expected to under-perform the Gruppo Mutuionline. But the stock apears to be less risky and, when comparing its historical volatility, Pentair plc is 1.22 times less risky than Gruppo Mutuionline. The stock trades about -0.17 of its potential returns per unit of risk. The Gruppo Mutuionline SpA is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  3,680  in Gruppo Mutuionline SpA on October 10, 2024 and sell it today you would lose (155.00) from holding Gruppo Mutuionline SpA or give up 4.21% of portfolio value over 90 days.

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

Pentair plc  vs.  Gruppo Mutuionline SpA

Pentair plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pentair Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Gruppo Mutuionline SpA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gruppo Mutuionline SpA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Gruppo Mutuionline may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pentair Plc and Gruppo Mutuionline

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

The idea behind Pentair plc and Gruppo Mutuionline SpA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.