Correlation Between Pentair Plc and Yanzhou Coal

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

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

Diversification Opportunities for Pentair Plc and Yanzhou Coal

-0.74

Correlation Coefficient

Pentair Plc  Yanzhou Coal

Pay attention - limited upside

The 3 months correlation between Pentair and Yanzhou is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Pentair plc and Yanzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yanzhou Coal Mining 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 Yanzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yanzhou Coal Mining has no effect on the direction of Pentair Plc i.e., Pentair Plc and Yanzhou Coal go up and down completely randomly.

Pair Corralation between Pentair Plc and Yanzhou Coal

Assuming the 90 days horizon Pentair plc is expected to under-perform the Yanzhou Coal. But the stock apears to be less risky and, when comparing its historical volatility, Pentair plc is 1.72 times less risky than Yanzhou Coal. The stock trades about -0.18 of its potential returns per unit of risk. The Yanzhou Coal Mining is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,080  in Yanzhou Coal Mining on October 10, 2024 and sell it today you would lose (10.00) from holding Yanzhou Coal Mining or give up 0.93% of portfolio value over 90 days.

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

Pentair plc  vs.  Yanzhou Coal Mining

Pentair plc

Risk-Adjusted Performance

10 of 100

Good

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

Yanzhou Coal Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yanzhou Coal Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Pentair Plc and Yanzhou Coal

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

The idea behind Pentair plc and Yanzhou Coal Mining 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.