Correlation Between PennantPark Investment and Pentair Plc
Can any of the company-specific risk be diversified away by investing in both PennantPark Investment 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 PennantPark Investment and Pentair Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PennantPark Investment and Pentair plc, you can compare the effects of market volatilities on PennantPark Investment 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 PennantPark Investment with a short position of Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Investment and Pentair Plc.
Diversification Opportunities for PennantPark Investment and Pentair Plc
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between PennantPark and Pentair is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Investment and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and PennantPark Investment 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 PennantPark Investment 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 PennantPark Investment i.e., PennantPark Investment and Pentair Plc go up and down completely randomly.
Pair Corralation between PennantPark Investment and Pentair Plc
Assuming the 90 days horizon PennantPark Investment is expected to generate 1.2 times less return on investment than Pentair Plc. In addition to that, PennantPark Investment is 1.14 times more volatile than Pentair plc. It trades about 0.08 of its total potential returns per unit of risk. Pentair plc is currently generating about 0.1 per unit of volatility. If you would invest 4,662 in Pentair plc on November 1, 2024 and sell it today you would earn a total of 5,156 from holding Pentair plc or generate 110.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PennantPark Investment vs. Pentair plc
Performance |
| Timeline |
| PennantPark Investment |
| Pentair plc |
PennantPark Investment and Pentair Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PennantPark Investment and Pentair Plc
The main advantage of trading using opposite PennantPark Investment and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Investment 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.| PennantPark Investment vs. Fevertree Drinks PLC | PennantPark Investment vs. National Retail Properties | PennantPark Investment vs. GOME Retail Holdings | PennantPark Investment vs. BJs Wholesale Club |
| Pentair Plc vs. PennantPark Investment | Pentair Plc vs. Tsingtao Brewery | Pentair Plc vs. Apollo Investment Corp | Pentair Plc vs. DIVERSIFIED ROYALTY |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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