Correlation Between Pentair PLC and Lindsell Train
Can any of the company-specific risk be diversified away by investing in both Pentair PLC and Lindsell Train 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 Pentair PLC and Lindsell Train into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and Lindsell Train Investment, you can compare the effects of market volatilities on Pentair PLC and Lindsell Train 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 Pentair PLC with a short position of Lindsell Train. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and Lindsell Train.
Diversification Opportunities for Pentair PLC and Lindsell Train
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Pentair and Lindsell is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Lindsell Train Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsell Train Investment and Pentair PLC 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 Pentair PLC are associated (or correlated) with Lindsell Train. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsell Train Investment has no effect on the direction of Pentair PLC i.e., Pentair PLC and Lindsell Train go up and down completely randomly.
Pair Corralation between Pentair PLC and Lindsell Train
Assuming the 90 days trading horizon Pentair PLC is expected to generate 0.68 times more return on investment than Lindsell Train. However, Pentair PLC is 1.48 times less risky than Lindsell Train. It trades about 0.26 of its potential returns per unit of risk. Lindsell Train Investment is currently generating about 0.01 per unit of risk. If you would invest 10,435 in Pentair PLC on September 13, 2024 and sell it today you would earn a total of 504.00 from holding Pentair PLC or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Pentair PLC vs. Lindsell Train Investment
Performance |
| Timeline |
| Pentair PLC |
| Lindsell Train Investment |
Pentair PLC and Lindsell Train Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair PLC and Lindsell Train
The main advantage of trading using opposite Pentair PLC and Lindsell Train positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, Lindsell Train 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 Lindsell Train will offset losses from the drop in Lindsell Train's long position.| Pentair PLC vs. Samsung Electronics Co | Pentair PLC vs. Samsung Electronics Co | Pentair PLC vs. Hyundai Motor | Pentair PLC vs. Reliance Industries Ltd |
| Lindsell Train vs. LBG Media PLC | Lindsell Train vs. Liberty Media Corp | Lindsell Train vs. Schroders Investment Trusts | Lindsell Train vs. Livermore Investments Group |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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