Correlation Between Pentair Plc and SHIN-ETSU CHEMICAL

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

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

Diversification Opportunities for Pentair Plc and SHIN-ETSU CHEMICAL

-0.55

Correlation Coefficient

Pentair Plc  SHIN-ETSU CHEMICAL

Excellent diversification

The 3 months correlation between Pentair and SHIN-ETSU is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and SHIN ETSU CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIN ETSU 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 SHIN-ETSU CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIN ETSU CHEMICAL has no effect on the direction of Pentair Plc i.e., Pentair Plc and SHIN-ETSU CHEMICAL go up and down completely randomly.

Pair Corralation between Pentair Plc and SHIN-ETSU CHEMICAL

Assuming the 90 days horizon Pentair plc is expected to generate 0.79 times more return on investment than SHIN-ETSU CHEMICAL. However, Pentair plc is 1.26 times less risky than SHIN-ETSU CHEMICAL. It trades about 0.34 of its potential returns per unit of risk. SHIN ETSU CHEMICAL is currently generating about -0.05 per unit of risk. If you would invest  7,942  in Pentair plc on September 12, 2024 and sell it today you would earn a total of  2,293  from holding Pentair plc or generate 28.87% return on investment over 90 days.

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

Pentair plc  vs.  SHIN ETSU 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.

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIN ETSU CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, SHIN-ETSU CHEMICAL 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 SHIN-ETSU CHEMICAL

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

The idea behind Pentair plc and SHIN ETSU 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.