Correlation Between Pentair PLC and NatWest Group
Can any of the company-specific risk be diversified away by investing in both Pentair PLC and NatWest Group 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 NatWest Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and NatWest Group PLC, you can compare the effects of market volatilities on Pentair PLC and NatWest Group 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 NatWest Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and NatWest Group.
Diversification Opportunities for Pentair PLC and NatWest Group
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pentair and NatWest is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and NatWest Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NatWest Group PLC 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 NatWest Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NatWest Group PLC has no effect on the direction of Pentair PLC i.e., Pentair PLC and NatWest Group go up and down completely randomly.
Pair Corralation between Pentair PLC and NatWest Group
Assuming the 90 days trading horizon Pentair PLC is expected to generate 0.94 times more return on investment than NatWest Group. However, Pentair PLC is 1.06 times less risky than NatWest Group. It trades about 0.11 of its potential returns per unit of risk. NatWest Group PLC is currently generating about 0.07 per unit of risk. If you would invest 5,940 in Pentair PLC on September 2, 2024 and sell it today you would earn a total of 4,959 from holding Pentair PLC or generate 83.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.02% |
| Values | Daily Returns |
Pentair PLC vs. NatWest Group PLC
Performance |
| Timeline |
| Pentair PLC |
| NatWest Group PLC |
Pentair PLC and NatWest Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pentair PLC and NatWest Group
The main advantage of trading using opposite Pentair PLC and NatWest Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC position performs unexpectedly, NatWest Group 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 NatWest Group will offset losses from the drop in NatWest Group's long position.| Pentair PLC vs. Ecclesiastical Insurance Office | Pentair PLC vs. Vitec Software Group | Pentair PLC vs. Veolia Environnement VE | Pentair PLC vs. MTI Wireless Edge |
| NatWest Group vs. Samsung Electronics Co | NatWest Group vs. Iron Mountain | NatWest Group vs. InterContinental Hotels Group | NatWest Group vs. Veolia Environnement VE |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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