Correlation Between Walker Dunlop and Pentair Plc

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

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

Diversification Opportunities for Walker Dunlop and Pentair Plc

-0.54

Correlation Coefficient

Walker Dunlop  Pentair Plc

Excellent diversification

The 3 months correlation between Walker and Pentair is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and Walker Dunlop 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 Walker Dunlop 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 Walker Dunlop i.e., Walker Dunlop and Pentair Plc go up and down completely randomly.

Pair Corralation between Walker Dunlop and Pentair Plc

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 9.06 times less return on investment than Pentair Plc. But when comparing it to its historical volatility, Walker Dunlop is 1.52 times less risky than Pentair Plc. It trades about 0.02 of its potential returns per unit of risk. Pentair plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  36,181  in Pentair plc on October 7, 2024 and sell it today you would earn a total of  25,959  from holding Pentair plc or generate 71.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.12%
Values	Daily Returns

Walker Dunlop  vs.  Pentair plc

Walker Dunlop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walker Dunlop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pentair plc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pentair Plc sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walker Dunlop and Pentair Plc

The main advantage of trading using opposite Walker Dunlop and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walker Dunlop 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 Walker Dunlop 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.