Correlation Between Pentair Plc and ULTRA CLEAN

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

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

Diversification Opportunities for Pentair Plc and ULTRA CLEAN

0.23

Correlation Coefficient

Pentair Plc  ULTRA CLEAN

Modest diversification

The 3 months correlation between Pentair and ULTRA is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and ULTRA CLEAN HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULTRA CLEAN 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 ULTRA CLEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULTRA CLEAN HLDGS has no effect on the direction of Pentair Plc i.e., Pentair Plc and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between Pentair Plc and ULTRA CLEAN

Assuming the 90 days horizon Pentair plc is expected to generate 0.62 times more return on investment than ULTRA CLEAN. However, Pentair plc is 1.61 times less risky than ULTRA CLEAN. It trades about 0.1 of its potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about 0.03 per unit of risk. If you would invest  4,590  in Pentair plc on October 5, 2024 and sell it today you would earn a total of  5,048  from holding Pentair plc or generate 109.98% return on investment over 90 days.

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

Pentair plc  vs.  ULTRA CLEAN HLDGS

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.

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ULTRA CLEAN HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ULTRA CLEAN is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pentair Plc and ULTRA CLEAN

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

The idea behind Pentair plc and ULTRA CLEAN 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.