Correlation Between Sealed Air and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Sealed Air 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 Sealed Air and Pentair PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sealed Air Corp and Pentair PLC, you can compare the effects of market volatilities on Sealed Air 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 Sealed Air with a short position of Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sealed Air and Pentair PLC.
Diversification Opportunities for Sealed Air and Pentair PLC
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sealed and Pentair is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air Corp and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC and Sealed Air 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 Sealed Air Corp 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 Sealed Air i.e., Sealed Air and Pentair PLC go up and down completely randomly.
Pair Corralation between Sealed Air and Pentair PLC
Assuming the 90 days trading horizon Sealed Air is expected to generate 84.67 times less return on investment than Pentair PLC. In addition to that, Sealed Air is 1.11 times more volatile than Pentair PLC. It trades about 0.0 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.4 per unit of volatility. If you would invest 9,973 in Pentair PLC on August 31, 2024 and sell it today you would earn a total of 939.00 from holding Pentair PLC or generate 9.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sealed Air Corp vs. Pentair PLC
Performance |
| Timeline |
| Sealed Air Corp |
| Pentair PLC |
Sealed Air and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sealed Air and Pentair PLC
The main advantage of trading using opposite Sealed Air and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air 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.| Sealed Air vs. Neometals | Sealed Air vs. Coor Service Management | Sealed Air vs. Aeorema Communications Plc | Sealed Air vs. JLEN Environmental Assets |
| Pentair PLC vs. Neometals | Pentair PLC vs. Coor Service Management | Pentair PLC vs. Aeorema Communications Plc | Pentair PLC vs. JLEN Environmental Assets |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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