Correlation Between Pentair Plc and Delta Electronics

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

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

Diversification Opportunities for Pentair Plc and Delta Electronics

0.87

Correlation Coefficient

Pentair Plc  Delta Electronics

Very poor diversification

The 3 months correlation between Pentair and Delta is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Delta Electronics Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Electronics Public 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 Delta Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Electronics Public has no effect on the direction of Pentair Plc i.e., Pentair Plc and Delta Electronics go up and down completely randomly.

Pair Corralation between Pentair Plc and Delta Electronics

Assuming the 90 days horizon Pentair Plc is expected to generate 2.55 times less return on investment than Delta Electronics. But when comparing it to its historical volatility, Pentair plc is 2.36 times less risky than Delta Electronics. It trades about 0.11 of its potential returns per unit of risk. Delta Electronics Public is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  159.00  in Delta Electronics Public on October 5, 2024 and sell it today you would earn a total of  269.00  from holding Delta Electronics Public or generate 169.18% return on investment over 90 days.

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

Pentair plc  vs.  Delta Electronics Public

Pentair plc

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Pentair plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Pentair Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Delta Electronics Public

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Delta Electronics Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Delta Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair Plc and Delta Electronics

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

The idea behind Pentair plc and Delta Electronics Public 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.