Correlation Between SOCGEN and Pentair PLC

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

By analyzing existing cross correlation between SOCGEN 6447 12 JAN 27 and Pentair PLC, you can compare the effects of market volatilities on SOCGEN and Pentair PLC 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 SOCGEN with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOCGEN and Pentair PLC.

Diversification Opportunities for SOCGEN and Pentair PLC

0.75

Correlation Coefficient

SOCGEN  Pentair PLC

Poor diversification

The 3 months correlation between SOCGEN and Pentair is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SOCGEN 6447 12 JAN 27 and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and SOCGEN 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 SOCGEN 6447 12 JAN 27 are associated (or correlated) with Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of SOCGEN i.e., SOCGEN and Pentair PLC go up and down completely randomly.

Pair Corralation between SOCGEN and Pentair PLC

Assuming the 90 days trading horizon SOCGEN 6447 12 JAN 27 is expected to generate 0.08 times more return on investment than Pentair PLC. However, SOCGEN 6447 12 JAN 27 is 12.02 times less risky than Pentair PLC. It trades about -0.14 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.18 per unit of risk. If you would invest  10,128  in SOCGEN 6447 12 JAN 27 on December 2, 2024 and sell it today you would lose (43.00) from holding SOCGEN 6447 12 JAN 27 or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	49.18%
Values	Daily Returns

SOCGEN 6447 12 JAN 27  vs.  Pentair PLC

SOCGEN 6447 12

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOCGEN 6447 12 JAN 27 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOCGEN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pentair PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pentair PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with SOCGEN and Pentair PLC

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

The idea behind SOCGEN 6447 12 JAN 27 and Pentair PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.