Correlation Between Pentair Plc and TIMES CHINA

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

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

Diversification Opportunities for Pentair Plc and TIMES CHINA

-0.34

Correlation Coefficient

Pentair Plc  TIMES CHINA

Very good diversification

The 3 months correlation between Pentair and TIMES is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and TIMES CHINA HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIMES CHINA HLDGS 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 TIMES CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIMES CHINA HLDGS has no effect on the direction of Pentair Plc i.e., Pentair Plc and TIMES CHINA go up and down completely randomly.

Pair Corralation between Pentair Plc and TIMES CHINA

Assuming the 90 days horizon Pentair plc is expected to generate 0.2 times more return on investment than TIMES CHINA. However, Pentair plc is 4.91 times less risky than TIMES CHINA. It trades about 0.13 of its potential returns per unit of risk. TIMES CHINA HLDGS is currently generating about 0.02 per unit of risk. If you would invest  9,150  in Pentair plc on October 25, 2024 and sell it today you would earn a total of  940.00  from holding Pentair plc or generate 10.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Pentair plc  vs.  TIMES CHINA HLDGS

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 uncertain basic indicators, Pentair Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TIMES CHINA HLDGS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TIMES CHINA HLDGS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TIMES CHINA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pentair Plc and TIMES CHINA

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

The idea behind Pentair plc and TIMES CHINA HLDGS 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .