Correlation Between Vulcan Materials and Pentair Plc

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

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

Diversification Opportunities for Vulcan Materials and Pentair Plc

0.74

Correlation Coefficient

Vulcan Materials  Pentair Plc

Poor diversification

The 3 months correlation between Vulcan and Pentair is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials i.e., Vulcan Materials and Pentair Plc go up and down completely randomly.

Pair Corralation between Vulcan Materials and Pentair Plc

Assuming the 90 days trading horizon Vulcan Materials is expected to under-perform the Pentair Plc. In addition to that, Vulcan Materials is 3.84 times more volatile than Pentair plc. It trades about -0.17 of its total potential returns per unit of risk. Pentair plc is currently generating about -0.14 per unit of volatility. If you would invest  62,034  in Pentair plc on December 24, 2024 and sell it today you would lose (2,663) from holding Pentair plc or give up 4.29% of portfolio value over 90 days.

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

Vulcan Materials  vs.  Pentair plc

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company 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. Despite somewhat strong basic indicators, Pentair Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vulcan Materials and Pentair Plc

The main advantage of trading using opposite Vulcan Materials and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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 Vulcan Materials 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.