Correlation Between Pentair Plc and STRAYER EDUCATION

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

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

Diversification Opportunities for Pentair Plc and STRAYER EDUCATION

0.94

Correlation Coefficient

Pentair Plc  STRAYER EDUCATION

Almost no diversification

The 3 months correlation between Pentair and STRAYER is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and STRAYER EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAYER EDUCATION 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 STRAYER EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAYER EDUCATION has no effect on the direction of Pentair Plc i.e., Pentair Plc and STRAYER EDUCATION go up and down completely randomly.

Pair Corralation between Pentair Plc and STRAYER EDUCATION

Assuming the 90 days horizon Pentair plc is expected to under-perform the STRAYER EDUCATION. But the stock apears to be less risky and, when comparing its historical volatility, Pentair plc is 1.02 times less risky than STRAYER EDUCATION. The stock trades about -0.17 of its potential returns per unit of risk. The STRAYER EDUCATION is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  9,200  in STRAYER EDUCATION on October 10, 2024 and sell it today you would lose (400.00) from holding STRAYER EDUCATION or give up 4.35% of portfolio value over 90 days.

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

Pentair plc  vs.  STRAYER EDUCATION

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.

STRAYER EDUCATION

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STRAYER EDUCATION are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, STRAYER EDUCATION exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair Plc and STRAYER EDUCATION

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

The idea behind Pentair plc and STRAYER EDUCATION 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.