Correlation Between Air Products and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Air Products 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 Air Products and Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products Chemicals and Pentair PLC, you can compare the effects of market volatilities on Air Products 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 Air Products with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Pentair PLC.
Diversification Opportunities for Air Products and Pentair PLC
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and Pentair is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Air Products 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 Air Products Chemicals 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 Air Products i.e., Air Products and Pentair PLC go up and down completely randomly.
Pair Corralation between Air Products and Pentair PLC
Assuming the 90 days trading horizon Air Products is expected to generate 1.8 times less return on investment than Pentair PLC. In addition to that, Air Products is 1.12 times more volatile than Pentair PLC. It trades about 0.21 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.43 per unit of volatility. If you would invest 9,879 in Pentair PLC on August 30, 2024 and sell it today you would earn a total of 1,033 from holding Pentair PLC or generate 10.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products Chemicals vs. Pentair PLC
Performance |
| Timeline |
| Air Products Chemicals |
| Pentair PLC |
Air Products and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Pentair PLC
The main advantage of trading using opposite Air Products and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products 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.| Air Products vs. Tungsten West PLC | Air Products vs. Argo Group Limited | Air Products vs. Hardide PLC | Air Products vs. Versarien PLC |
| Pentair PLC vs. Tungsten West PLC | Pentair PLC vs. Argo Group Limited | Pentair PLC vs. Hardide PLC | Pentair PLC vs. Versarien PLC |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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