Correlation Between Xunlei and Pentair PLC

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

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

Diversification Opportunities for Xunlei and Pentair PLC

-0.07

Correlation Coefficient

Xunlei  Pentair PLC

Good diversification

The 3 months correlation between Xunlei and Pentair is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Xunlei Ltd Adr and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Xunlei 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 Xunlei Ltd Adr 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 Xunlei i.e., Xunlei and Pentair PLC go up and down completely randomly.

Pair Corralation between Xunlei and Pentair PLC

Given the investment horizon of 90 days Xunlei is expected to generate 3.96 times less return on investment than Pentair PLC. In addition to that, Xunlei is 2.01 times more volatile than Pentair PLC. It trades about 0.01 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.09 per unit of volatility. If you would invest  4,932  in Pentair PLC on October 12, 2024 and sell it today you would earn a total of  4,765  from holding Pentair PLC or generate 96.61% return on investment over 90 days.

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

Xunlei Ltd Adr  vs.  Pentair PLC

Xunlei Ltd Adr

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Xunlei Ltd Adr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Xunlei is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pentair PLC

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Pentair PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Pentair PLC is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Xunlei and Pentair PLC

The main advantage of trading using opposite Xunlei and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xunlei 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 Xunlei Ltd Adr 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.